The USD is higher to end New York after a volatile session after the release of US data. Although the… … Retail Sales data came in about as expected,
upwardly revised data from last month sparked a swift rally in the greenback sending it to the best levels of the day.

The USD managed to hold gains
against the Yen and Swissy but gave back some gains against EURO and Cable
to end the day; traders note that volumes were very patchy on the move and
order-flow was sporadic and directionless despite the firm pricing. USD is
likely setting up for a rotation lower and the technical picture looks a bit
supportive of that view. Cable made a new monthly low at 1.9417 before
rotating higher to eventually print 1.9496 for the New York high but well
off the European high at 1.9589; traders note the reversal was unexpected
after the release of higher than expected UK CPI data this morning. Cable
settled around the 1.9450/60 area in quiet trade. EURO fell in sympathy with
GBP as cross-spreaders lifted EURO off the post-data lows of 1.5429 and EURO
gained the 1.5500 handle again before settling back as flows became
confusing after the London Fix. Traders note that EURO appears to have found
a near-term bottom and believe support is firm around the 1.5380/1.5400
area. The rate will likely draw some short-covering by late shorts this
morning during the next 24 hours so expect a continued grind higher ahead of
US data in the morning tomorrow. USD/JPY continued to grind higher all
afternoon on light volume; making the high for the day ahead of the close at
104.93 touching the 100 bar MA in the process. Sellers said to have plenty
of offers waiting at the 105.00 area and it will be important to see if
those offers show up overnight in Japan this evening. Given the recent
strength in the Yen this correction higher by the USD is likely to attract
sellers and the key is how thick they are at this level. Aggressive traders
can look for a short on any further USD strength in my view. Tomorrow is US
CPI data and with the recent information tending to support the Fed is not
done easing yet, I would expect that a weaker than expected number could
ignite a bout of USD long-liquidation in the morning. The market seems
prepared for that and recent strength despite weak volumes appears to be an
opportunity to sell.

USD/JPY Daily

Resistance 3: 105.80
Resistance 2: 105.50
Resistance 1: 105.00/10
Latest New York: 104.72
Support 1: 104.20/30
Support 2: 104.00
Support 3: 103.80

Comments

Rally back from the Friday lows likely a Head-Fake; double -top has formed
and a strong sell signal suggests a potential short is now confirmed at the
105.00/50 area again. Today's test of the highs stalls on light volume just
under the 100 bar MA. Late sell-off significant as longs likely threw in the
towel. Stops above 104.30 area drove trade today; they are gone so look for
the rate to rotate lower overnight. Rate has broken trend line support and
Tuesday's attempt to score a high over the 104.00 handle may be the test of
the trend line break. Traders note that the market continues to trade
technically and expect stops to be run in both directions near-term; some of
which likely happened overnight Tuesday. Continue to expect more volatility.
Looking for the rate to briefly follow through higher for a short-covering
rally through Tuesday but fall harder into mid week; likely under the 103.00
handle. Day traders may get a lot of opportunity as the rate will likely
cover a lot of the same ground twice on the hourly time frame. Stops could
be in size at the 102.50/80 area. Resistance at 104.80 area remains
significant now and rallies should be sold.

Data due Wednesday: All times EASTERN (-5 GMT)

7:50pm JPY Core Machinery Orders m/m -5.2%

USD/CHF Daily

Resistance 3: 1.0610/20
Resistance 2: 1.0580
Resistance 1: 1.0550/60
Latest New York: 1.0524
Support 1: 1.0470/80
Support 2: 1.0410/20
Support 3: 1.0380

Comments

Rally overnight may be expected in sympathy with YEN and/or weaker
commodities but upside appears limited. Pullback from 105.00 area gained
some credibility as offers appear from big names traders say. Monday's
failure above the 1.0500 handle significant in my view. Likely this rally
overnight Tuesday is testing the break-down; be ready to sell. Upside is
limited and the volumes aren't that great so far today again. Be nimble
though as a break below 1.0380 likely to draw aggressive selling. Rate
continues to attract dip buying; next dip will likely be bought around
1.0250 area again; but last three dips have failed to create significant
rally. Failure last week at 1.0550/1.0600 area is setting up a short; look
to sell the next rally; around 1.0500/20 I think. Highs above the 1.0500
area may keep the rate two-way action before a move in either direction.
Close under the 1.0400 area sets up a loss to 1.0250 near-term.

Data due Wednesday: All times EASTERN (-5 GMT)

NONE

Analysis by: Forexpros.com written by Jason Alan Jankovsky

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