Overnight Asia/Europe

• USD recovers in Asia, falls in late Europe

• German ZEW better than expected, EURO rallies to new high

• Cable follows EURO higher

Today’s Economic Reports

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

Looking Ahead

• Friday CPI forecast +0.3%, core +0.2%


The USD is softer this morning after staging an early recovery in Asia. Initially trading to highs for the week against Cable and showing signs of potential upside against the other majors the USD came under selling pressure in late European trade after the release of German ZEW Sentiment date. Although the number was lower at -32 vs. -39.5 last month it was above median forecasts of -40.0 giving traders a boost to buy EURO. EURO rallied on the news first finding stops above the 1.5400/10 area and then with active buying rallied above the previous highs last Friday for a new lifetime high at 1.5496 before offers expected ahead of the 1.5500 figure capped the move. Russian names, US investment names were seen on the bid traders say; offers were from profit-taking by longs and option defense ahead of the 1.5500 number. EURO remains firm ahead of today’s Balance of Trade data due out this morning but traders don’t see any surprises in the works. The slowdown in the USD economy will likely have slowed the trade deficit so even a better-than-expected number is actually expected; traders suggest that another round of USD short-covering may result but sentiment remains almost 100% bearish—which is scary in my view. When the EURO finally corrects it could be an absolute blood bath in my view. Cable followed EURO higher with Middle-Eastern names seen buying as the pair rallied into stops at the 2.0150 area for a high print at 2.0214 before falling back. Opening New York at 2.0270 area suggests a bit of selling pressure is coming on as the rate hold below previous printed high and below the 50% fib defense. Traders note that volumes in both GBO and EURO were average so far today. USD/JPY has found good support after seeing a break lower in Asia. Low prints at 101.41 were bought by semi-official names and real money account and the rally extended into the 102.20 area just ahead of the New York open. Stops were seen close in at 102.20/30 for a high print at 102.33 with more stops said to be resting at 102.50. Today’s US data is most likely going to be a non-event although a very good number could spark a modest USD rally; most traders are watching CPI on Friday. Speculation that the US Fed will cut rates by 75 BP remains high and a strong inflation number may stifle that enthusiasm.

Analysis by: Jason Alan Jankovsky in Association with The Forex Edge

Publisher: ForexPros.com

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