Overnight Asia/Europe

• USD two-sided inside established ranges

• Technical trade expected Monday

• UK data showing strong inflation

Today’s Economic Reports

• None of note in the US

Looking Ahead

• Overnight Tuesday German ZEW sentiment

• 7:30 AM CST Tuesday Balance of Trade forecast -59.5B


The USD is starting the week two-sided in basically technical trade. Overnight ranges remained inside established ranges from last week and only modest follow-through from Friday’s rally seen. Cross-spreading for Yen remains a major focus as the carry traders continue to buy high-yielding rates but intraday volatility still a concern as the overall trend for USD remains down. Bids are noted some desks are saying and order boards remain thin after last week’s stop-driven action; most likely traders are waiting on US data this week for further clues to what the US Fed will do at the FOMC meeting next week. Most traders feel a 50 BP cut is a done deal and the markets are currently pricing in a strong odds for a 75 BP cut. Across the board the majors have fully priced in a 75 BP cut and anything less is likely to ignite a USD short-covering rally in my view. Strong UK input price data released this morning showed input prices at their highest level since records were kept at +1.7% m/m and 19.1% y/y; high crude oil prices are to blame analysts say. In response the GBP rallied off its early Asian low of 2.0148 for a high print at 2.0223 but offers were ready above the 2.0110 area traders say. The rate has since fallen back to the 2.0180 area in light trade but the upside remains limited traders say; overbought readings and overhead resistance appear to have capped the move near-term. EURO is weaker to start New York after posting an overnight high at 1.5405; currently trading 1.5341 and on the low of the day. Traders note that the rate has buy the dip players in play to start the week but also note those accounts are e-platform and smaller players suggesting late longs who will place stops close-in; look for further weakness in EURO through the week. Aggressive traders can sell EURO/USD above the 1.5350 area and maybe again above the 1.5380 area if trade gets there this week. USD/JPY is lower to open New York but firmer off the Asian lows at 101.82 where good importer demand was seen. High prints in European trade at 102.45 with light stops seen around the 102.20 area after the dip suggesting again late shorts selling into the hole. Look for consolidation to continue ahead of US data Tuesday and German ZEW.