Jason Alan Jankovsky Morning Dollar Briefing Feb 2nd
The USD is trending lower after a quiet start to Asia that saw continued two-way action; overnight equities were mixed with most markets beginning to recover a bit as pre-trade futures show slight gains into early New York. The big news overnight was the RBA leaving interest rates unchanged at their regular monthly meeting; traders were ready for another 25 BP hike and the surprise unchanged announcement caused a bit of whipsaw but the net result was a cap to the greenback against the majors with a steady decline seen through European trade.
The USDX is flirting with the 100 hour MA with a close below setting up a potential top in place from Friday’s highs; traders note that the greenback is in over-bought territory against most pairs and a reasonable correction might be in play with bids noted under the market in most pairs suggesting a corrective tone into mid-week.
Overnight news was positive for the majors, UK CIPS construction index was a better-than-expected 48.6 boosting Cable back to near-term resistance; high prints at 1.5977 were capped by tech resistance at 1.5980 as expected but the rate is firm around the 1.5950 area in early New York. Low prints at 1.5901 on whipsaw around the RBA announcement. Traders expect stops in size above the 1.6000 handle if we continue higher in the rate this morning after US data.
EURO is posting new highs into early New York lifted in part by better German Retail Sales data; high prints at 1.3959 area expected to fall as upside resistance is better ahead of 1.3980 most desks report. Offers are said layered to 1.4000 with stops above suggesting a lift to resistance will provide a possible recovery attempt. Low prints at 1.3885 were on the area of reported semi-official demand with traders reporting macro account interest on the buy side under 1.3920 area overnight.
USD/JPY is sideways failing to extend in either direction; high prints at 90.92 were under the previous highs with lows at 90.45 making for a very tight range. Upside is said to be full of offers between 91.00 and 91.30 with stops mixed in around 91.10/20 with more above 91.50. A strong day in equities might help with a rally but the day is young.
USD/CHF is lower as the Swissy lifts into early New York; low prints at 1.0550 is on tech support but the rate is weak and not showing signs of a bounce yet. Swiss consumer sentiment was better than expected possibly adding a bit of pressure to the rate.
USD/CAD is dropping through support at the 1.0580 area for low prints in earl y New York at 1.0583; traders expect bids around the 1.0550 area to cushion further declines but warn that stops are likely in the 1.0540 area under the 100 day MA which comes in today at 1.0555.
In my view, the USD is correcting lower as expected from the sharp rally last week; the USDX is likely a bit overdone to the upside and a reasonable correction this week would clear out late longs and set the stage for a further lift later in the month. Look for US data today to help equities lift a bit adding to the risk on trade but expect the USD to bottom early today as two-way flows are likely ahead of Friday data.
Jason Alan Jankovsky
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