USD two-way again, GBP rallies back, Fed cuts; Forex Analysis
As expected the FOMC cut interest rates 25 BP today and changed the wording of the statement suggesting that the Fed is taking a more neutral course in the coming months. Analysts are debating that the Fed would like to see the effect of both the new liquidity windows and the government rebate-stimulus package before weighing in on further rate cuts.
The Fed made clear that it is still considering the inflation pressures seen recently and the bottom line to the rate cut is a “wait and see” attitude. In response the USD whipsawed trader’s on the news; initially rising against some pairs and then getting slammed later.
Traders note that the rally in GBP as well as EURO are “knee jerk” responses to trade volatility and don’t expect a serious change in trend; most agree the USD “squeezed” weak longs initially. For the record, the GBP rallied on news starting this morning as other US news was not USD friendly but popped higher on stops and short-covering above the 1.9800 handle for a high print at 1.9897 before finding offers at technical resistance around the recent developing down trend. Traders note that cable has been exceptionally volatile the past several weeks and today was no exception; if the rate follows suit the next 24 hours we should see a return to the 1.9600 handle by the end of the week.
EURO rallied initially on the news for a high print at 1.5645 and looks set to continue higher but offers in the 1.5650 area and 1.5680 area are said to be getting thicker so this rally off the lows may be a dead-cat bounce. Look for a lack of follow-through overnight. USD/JPY broke under the 104.00 handle in heavy trade for a low print at the 103.68 number at last look; traders note that the rate has had good selling from CTA types and exporters around the 104.60/80 area this morning. USD/CAD and Swissy also taking their lumps but not nearly as aggressively as other pairs; OK to hold open shorts across the board and let the overnight action work for us. Tomorrow is a light day for news so expect a rotation in the USD; especially against GBP.
Resistance 3: 1.9950
Resistance 2: 1.9900/10
Resistance 1: 1.9820/30
Latest New York: 1.9883
Support 1: 1.9820/30
Support 2: 1.9780
Support 3: 1.9750
Other Things to Watch/Open Trades/News
4-30-08 SELL GBP/USD 1.9820 OB Stops@ 1.9920
(Should be short from this afternoon)
Whipsaw still evident, selling into the top of the trend line and volatility.
Rate under 1.9720 area important but rally back clears weak shorts. major stops likely under the 1.9600 handle; likely to be challenged soon but given conditions a bounce is coming first (which happened after FOMC)
Upside remains limited in my view but ranges can be wide as evidenced by the past few days of trade. Sell rallies if not short; buying dips dangerous in my view.
Drop to under the MA’s very important, long selling wick makes sell side attractive for further losses. Need down bars with higher volume to confirm.
Overnight data unfriendly with more to come, Some pressure from EURO also.
Rate attracting bids from momentum players so look for stops close-in overnight.
Data due Thursday: All times EASTERN (-5 GMT)
2:00am GBP Nationwide House Prices m/m -0.5%-0.6%
Forex Analysis by Jason Alan Jankovsky at ForexPros.com. For more details about Forex Trading and Tips for decent earnings through Forex Trading, Please check http://www.forexpros.com/