Daily Analysis - 02/04/2009


Master Trader
Mar 31, 2009
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Today’s US Dollar Trading

• USD extends ranges in some pairs, volumes light after fix
• Majors hold important S/R
• Stops likely waiting on either side of the market

Overnight Preview

• Look for more two-way action
• Should get quiet ahead of news tomorrow

Looking Ahead to Thursday
All times Eastern (-5 GMT)
• 8:30am USD Unemployment Claims
• 10:00am USD Factory Orders m/m
• 10:30am USD Natural Gas Storage
• All Day ALL G20 Meetings

The USD ends mixed today after another volatile two-way session; some pairs extending their ranges during New York trade. Most action was ahead of the London fix as US fundamentals were released as well as overseas news reports from pre-G-20 meeting participants; traders note that volumes dropped significantly after the London fix exaggerating price moves into the end-of-day. GBP rallied to a new daily high ahead of expected resistance around the 1.4450 area; high prints in late New York at 1.4440 with traders ready for more upside overnight as stops above the 1.4450 area are said to be in size. Cross-spreaders for GBP also active some desks report but most of the action was overnight for Yen. EURO fell back from post-London fix action to head for the lows making a show under the 1.3200 handle briefly before recovering back to the 1.3250 area; high prints in New York at 1.3287 were not enough to trigger stops said to be resting above the market. Traders note that the 1.3300 area is likely key resistance ahead of the ECB meeting tomorrow with a quiet overnight session likely as traders wait for news.
USD JPY remained two-way first dropping to the low 98.00 handle but failing to extend lows; then rallying back above the 99.00 handle before dropping back. Price action likely suggests intraday traders with smaller capital day-trading the range. Closing below the 99.00 area and making for a “doji” day, traders expect any upside follow-on buying to be limited with overhead resistance said to be formidable above the 98.50 area. Aggressive traders can sell 99.00 area if there is any two-way action overnight. USD/CHF managed to rally to a high print back at the 100 day MA of 1.1510 before dropping back to end the day around the 1.1450/60 area. Low prints at 1.1370 were on low volume with stops said to be resting under the 1.1350 area. USD/CAD also extended the day’s range for a high print in pre-London fix action to 1.2719 before dropping back more than a full handle to the 1.2600/10 area; low prints at 1.2573 are still above the stops said to be resting in the 1.2550 area. Traders note that across all pairs action was order-driven and thin suggesting that both sides are either flat or happy with their positions ahead of the G-20 communiqué and the ECB rate announcement due in the morning. In my view, the USD is continuing to cover the same ground twice as expected; likely there are stops building on both sides of the market and tomorrow will see more two-way action. If the Greenback can’t hold recent gains the possibility of a further long-liquidation break by the end of the week is a real probability. Aggressive traders can add to open shorts in the USD on any strength overnight as current ranges are likely to hold. Look for more consolidation by the USD into news tomorrow. Be patient and let open shorts work through the ECB data in the morning as the expected rate cut from the ECB is likely well-factored in.


Resistance 3: 1.4500
Resistance 2: 1.4440/50
Resistance 1: 1.4420
Latest New York: 1.4450
Support 1: 1.4180
Support 2: 1.4050
Support 3: 1.4020

Rate makes new highs late in the session; holds gains after two-way action overnight. Positive UK manufacturing data helps hold tone. Traders note stops above the 1.4450
forex signals area as expected with offers ahead. Stops cleared over 1.4250 and 1.4300 with more cleared above 1.4350/80 area. A close back under the 1.4250 area argues for more losses but support is solid around 1.4100 so aggressive traders can buy dips. Close over 1.4450 argues for further gains. Overhead resistance now drops to 1.4380 to 1.4440 area; overhead target of the 1.5000 area likely to be on hold with a test of the lows first possibly creating a range. Traders feel the 23-year lows will likely remain secure. The shorts have taken control of the market above the 1.4440 area for now and if a range is forming a test under the 1.3900 handle is likely; traders report stops in-range adding for two-way action.
Data due Thursday: All times EASTERN (-5 GMT)
2:00am GBP Nationwide HPI m/m
2nd-9th , GBP Halifax HPI m/m
4:30am GBP BOE Credit Conditions Survey
4:30am GBP Construction PMI


Resistance 3: 1.3400/10
Resistance 2: 1.3380
Resistance 1: 1.3330
Latest New York: 1.3240
Support 1: 1.3150
Support 2: 1.3100
Support 3: 1.3080

Rate holds point of indecision so far today; late break fails to attract more bids but still solid above the 100 day MA. Traders note strong offers above the 1.3330 area but bids are absorbing those for now with a foothold over the 1.3300 handle to signal a short-squeeze. Rate has two-way action suggesting a try for stops above. Rate likely has stops building in both directions but shorts have taken minor control of the market as the rate gives back gains over the 1.3400 area last week late. Action remains two-way; any move lower is likely supported on dips. Overhead resistance of 1.3330/50 area now back in play; expect sellers in that area on a rally. Possibly more official and semi-official bids overnight with traders noting Middle-eastern names on the bid. Long-term bulls are likely still in control of the market and this significant pullback is a buying opportunity in my view.
Data due Thursday: All times EASTERN (-5 GMT)
7:45am EUR Minimum Bid Rate
8:30am EUR ECB Press Conference
10:00am EUR ECB President Trichet Speaks

Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)

Analysis Provided by: - Written by Jason Alan Jankovsky

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