Dollar holds range despite major world events

EUR USD (1.2770)
Range-traders managed to keep the euro firmly hemmed in yesterday. It is even remarkable that it still trades the same range that was put in place last Friday – and even that was no more than average. Yet much has happened in the meantime: a possible halt to the Fed’s two-year tightening cycle and a major terror alert. The euro met (predictably) good selling as it retested the recent 1.2910 highs. Trading volumes were very robust – especially in the high $1.28s – which means that many people were in on the act (according to market talk, even central banks). The US trade figures were finally just a footnote to the day’s activity. The euro fell thereafter, but not because of the number; traders simply waited for the release to be out of the way before doing what they had planned to do anyway.

Our dip-buying effort from yesterday came unstuck overnight as the single-currency retreated to a 1.2745 low (apologies). But all is not lost. Good support still remains at 1.2710 and this would also merit a ‘last’ bullish strategy (already at 1.2725). The risk-limit would have to be set immediately below as the demand situation deteriorates dangerously thereafter, exposing a risk down to 1.2430. To the upside, any move above 1.2860 would suggest a re-stabilisation.

USD JPY (115.50)
The dollar simply re-traded a familiar near-term range yesterday. Among a mixed market discussion, talk about a revival of carry-trading, a review of the prospects for yuanflexibility and, later on, the implications of oil-price weakness, all made an appearance. No consistent theme developed to suggest that traders adhered to any directional preference. We therefore continue to anticipate further sideways action. We monitor nearby points at 114.90 and 114.50 to the downside, and at 115.90 and 116.75 to the upside.

EUR JPY (147.60)
The cross corrected more forcefully from our tough overhead point yesterday. As mentioned in our last report, the euro has already filled its near-term upside potential, so we can no longer subscribe to the idea of buying on dips. Indeed, a violation of support at 146.10 would open the door to even greater downward correction. Initial demand comes in at 146.90 today. Any rebound will now meet resistance at 147.90. One can even anticipate good supply at 148.70 in case of a move to new highs.

GBP USD (1.8920)
Cable ought now to have moved back to levels that would-be dip-buyers should find attractive. Although it is possible that yesterday’s UK terror alert scared off some buyers, we assume that many of those who had missed out on Sterling’s prior upmove (or who were on the wrong side off it) have had the chance to cover. This will take some of the dynamism out of the uprend, meaning that good supply will already be apparent at 1.9050 and that the risk for more downward corrections to 1.8655 must be considered.

AUD USD (0.7710)
Our previous objective at 0.7710 capped the upswing yesterday and remains the most important overhead hurdle. Beyond there, we would look for further immediate gains to 0.7810. Support, now at 0.7655/60, would serve as a new downside risk-limit for a further bullish strategy – either following a break higher or in the case of an earlier dip.