Overnight Asia/Europe

•USD sharply lower

•German data surprises, EURO higher

•Cable breaks resistance, also higher

Today’s Economic Reports

All times EASTERN (-5 GMT)

•8:30am USD PPI m/m 0.4%

•8:30am USD Core PPI m/m 0.2%

•9:00am USD Fed Vice Chairman Kohn Speaks

•:00am USD IBD/TIPP Economic Optimism 38.0

Looking Ahead to Wednesday

All times EASTERN (-5 GMT)

•10:30am Crude Oil Inventories 0.2M

•1:00pm Fed Governor Warsh Speaks

•2:00pm FOMC Meeting Minutes


The USD is sharply lower to start New York this morning; traders note German economic news and rhetoric from ECB’s Weber providing a lot of the push higher in EURO. Starting Asia firm the USD hovered around NY closing levels early and had a brief bout of buying but reserve manger selling was seen capping the highs for the day and the USD began a gradual slide through the European open. The big mover on the boards is EURO today breaking through several levels of recent resistance areas and finding stops above the market as well. Beginning the march higher was stronger-than-expected German PPI data marking the fourth month in a row PPI has been higher than expected. Comments from ECB council member Weber suggested that an interest rate hike can’t be ruled out this year sent traders scrambling to cover shorts. Stops were noted also on the break above the Monday highs at 1.5560/70 area with more above the 1.5600 and 1.5630 area; high prints were at 1.5675 and those after a brief retracement on German ZEW data. Additionally, ZEW President Franz said he agreed with Weber that an interest rate hike by the ECB is likely which sent the EURO rallying back to test the highs before a round of profit taking dropped the rate back to the 1.5640 area to start NY. Traders note Russian buys at the start of the session linked to rumors of Ruble revaluation but so far that is not confirmed. Cable followed EURO higher and scored a high print at 1.9670 before falling a bit into the start of NY; traders note that technical resistance comes in around the highs and up to the 1.9700/10 area and that may be it on the day. A surprise by US PPI this morning is likely to encourage a bout of USD selling but with the EURO and Cable above resistance already the worst may be in for the day. USD/JPY dropped under the 104.00 handle but so far stops under the 103.50 area are out of range. Swissy also under the 1.0400 handle briefly but stops again out of range. Today’s PPI will likely offer more volatility.


Resistance 3: 1.5730

Resistance 2: 1.5700

Resistance 1: 1.5670/80

Latest New York: 1.5645

Support 1: 1.5600

Support 2: 1.5550

Support 3: 1.5500


Overnight news suggests that the ECB will raise rates soon; traders caught wrong-footed and covered shorts hard. Stops noted above the 1.5630/40 area and the press to fresh highs at 1.5680 area likely to hold as resistance near-term. Today’s PPI data could ignite more buying if disappointing. The downside correction is likely over if a close is above the 1.5640 area today. Crude prices will likely continue offering a bit of volatility support on dips. Longs likely to have rolled up stops under the 1.5520 area so volatility possible. I would stay away from the short side for the rest of this week. The rate is setting up for a potential upside recovery. Bounce back from dip under the 1.5500 handle suggests active buying on dips; traders say lots of official and sovereign names seen buying dips. I think the recovery has some legs this time.

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

4:00am EUR German Ifo Business Climate Index 102.1

4:00am EUR German Ifo Business Expectations Index 96.5


Resistance 3: 105.00

Resistance 2: 104.80

Resistance 1: 104.50/60

Latest New York: 104.12

Support 1: 103.70

Support 2: 103.50

Support 3: 103.20/30


Rate falls back after a weak rally in Asia; traders note that stops are building in size under the 103.50 area with bids layered below to 103.00 area. Stops said to be large enough to drive the rate through bids for a test of the 102.80 area. Failure to score the 105.00 handle very significant in my view. Upside will continue to be labored now in my view but be nimble on shorts; we need a solid close under the 103.80 area next. If PPI disappoints today, that may be in the works for this afternoon. Conviction of the sellers being challenged but I think the weak hands are the longs as the volumes are increasing on the breaks and lighter on the rallies. Traders note that the market continues to trade technically and expect stops to be run in both directions near-term; Day traders continue to get a lot of opportunity as the rate will likely cover a lot of the same ground twice on the hourly time frame. Resistance at 104.80 area remains significant now and rallies should be sold.

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

7:50pm JPY All Industries Activity Index m/m -0.2%

7:50pm JPY Trade Balance 0.79T