U.S. Dollar Under Pressure as Pairs Shorts Squeezed

By: ForexPros

The USD is mixed this morning after starting better in Asia; the Greenback is giving back gains across the board and opens new York better against CHF and JPY—lower against CAD and about flat against GBP and EURO. Overnight comments by BOE MPC member Blanchflower were seen as GBP-negative as he remarked “obviously rates are heading towards zero” and unemployment would rise;GBP low prints in Asia at 1.3547 were inside Fridays’ range and the rate is recovering to make highs in early New York at 1.3878 topping Friday’s highs.

Traders note that shorts were caught wrong-footed after the news and covered as the rate inched up over the 1.3700 handle; a potential short-squeeze is in the works and more large stops are reported resting near the 1.3900 area and above. Cross-spreaders for Yen and EURO are also getting pinched a bit suggesting the rate is bid across all pairs making for a well-coordinated buying effort.

EURO is slightly lower but on the rise no doubt being pressured by Cable; low prints at 1.2860 were again at technical support around the 1.2850 area with highs at 1.2988 so far. Traders note stops are likely on a break of the 1.3030 area which has acted as resistance the past few sessions. In my view the EURO is set to advance this week as most of the interest rate picture is factored in and economic news from the US this week is expected to be USD-bearish for the most part. Should GBP advance and hold over near-term resistance it likely will take EURO with it.

USD/CHF high prints were also inside range at 1.1647 but the rate is holding under the 1.1580 area in early New York suggesting that resistance over the 1.1580 area is solid near-term. Low prints at 1.1533 were supported but the last few days of closes have been around the 1.1520 area so a test for lows today would be crucial I think to a potential top forming in the 1.1580/1.1650 area.

USD/CAD is lower and dropping to new lows under Friday’s close, low prints at 1.2174 are under the 50 day MA and under near-term fib support suggesting the rate will decline for the week; high prints in early Asia at 1.2391 were on low volume traders say also lending support to a down move coming.

USD/JPY is higher overnight as support at the 88.50 area continued to hold; low prints at 88.25 were quickly bought in Asia as follow-on selling from Friday’s weak close failed to find additional sellers. High prints in late European trade at 89.49 leaving a fairly tight range but showing signs of a potential short-squeeze to end the month. In my view, last week was the important week for the USD as continued signs of topping against most pairs suggest the USD will end the month net higher but well off the lows. A lower close this week for the USD will signal a lower Feb as well I think. Look for the USD to remain under pressure through mid-week data.

GBP USD Daily

Resistance 3: 1.4010/20, Resistance 2: 1.3950, Resistance 1: 1.3880

Latest New York: 1.3878, Support 1: 1.3550, Support 2: 1.3500/10, Support 3: ?

Comments

Rate falls back to open Asia but rallies to trade better on the day after MPC Blanchflower comments fail to depress the rate; light stops seen on the move over the 1.3700 area as late shorts get squeezed. Aggressive bids seen and the rate recovers as New York trades. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom with shorts losing this morning. Stops and aggressive selling drive the rate to a 23.0 year low last week. Short-squeeze delayed after first attempt to rally was sold back. Overnight economic news seen as neutral to bearish; rate trading on technical’s now. Signs of the bottom may be showing up as “smart” buyers reported in GBP Wednesday and Thursday night last week. Spillover from EURO likely but modest. Look for two-way action into this bottom. A short-covering rally is increasingly likely now. Late sellers likely in or hurting.

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

6:00am GBP CBI Realized Sales

EUR USD Daily

Resistance 3: 1.3150, Resistance 2: 1.3100/10, Resistance 1: 1.3030

Latest New York: 1.2986, Support 1: 1.2850/60, Support 2: 1.2800/10, Support 3: 1.2750/60

Comments

Rate follows GBP higher but still lower on the day despite new highs in New York at 1.3004 at writing; drop is less volatile and the rate holds tech support at 1.2850/60 area. Rally all day today suggests a short-squeeze is in the works. Stops baked on the dip under 1.2880 again overnight; stops increasingly likely around 1.3030 area and layered above. Bulls are attempting to find a bottom. Bottom may be forming around the 1.2850 area as it has bounced three-times from there. 50 bar MA failed now likely to offer resistance and a close above suggests the bottom will be in. Close over 1.3000 to end the day today will be seen as positive for a rally. Semi-official and sovereign bids and offers seen last week. Technical levels around the 1.3300 area now likely to offer resistance so expect two-way action and consolidation. Aggressive traders can look to buy the next dip.

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

2:00am EUR German Import Prices m/m

4:00am EUR German Ifo Business Climate

4:00am EUR Current Account

Analysis by: http://www.Forexpros.com - Written by Jason Alan Jankovsky

Forexpros offers the most definitive Forex portal on the web. It contains industry leading market analysis, up-to-the minute news and advanced trading
tools which provides brokers, traders and everyone involved in the financial market with an all-round guide to Forex.

Copyright © 2009 by ForexPros.com All rights reserved.

Disclaimer: Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.