Published: Jan. 18 2005, 07:31 GMT
USD strengthens in quiet session

US Dollar moved stronger despite closed US markets yesterday as market speculates on hawkish Fed rhetoric today. UK house price data out overnight sees stronger GBP vs. EUR and CHF.



MAJOR HEADLINES – PREVIOUS SESSION



USD strengthens in Asian session on speculation of hawkish Fed rhetoric today.

USD/JPY climbs back above first resistance at 102.30.

UK RICS House Price Balance higher than expected and sees GBP stronger vs. EUR and CHF.

























THEMES TO WATCH – UPCOMING SESSION

Fed rhetoric today very important for market direction – various Fed officials to speak in early US hours.

Markets may be over-bearish on US Treasuries as the speculation is at near fever pitch on what signals are coming from the Fed with the fear being that the Fed is tending toward increased hawkishness – this is a slightly contrarian signal to our overall view that the USD is headed stronger (over-speculationg meaning that Treasuries would potentially rally – which is theoretically bearish for USD). But until proven otherwise, we prefer the strong USD view.

Also important today is the TIC data for November, which gauges foreign appetite for US securities. One must admit, however, that the number isn’t very forward looking.

Trading Note: Big event risks today with a speculation of a hawkish Fed and the TIC data (US Net Foreign Security Purchases). Markets could see a lot of action today, but in general, we still prefer the strong USD view.











EURUSD

EUR/USD broke to new lows overnight once the 1.3060 support gave way and almost touched the big 1.3000 level. The 1.3060 level is now resistance and EUR/USD may push lower to 1.2900 on the next downward wave today.

[font='trebuchet ms', arial, sans-serif]Resist.1.3217

1.3151



1.3044



1.3019



1.2953

Support
[/font]






GBPUSD

GBP/USD saw a little pop overnight on the house price data after yesterday’s demise. But the chart remains markedly bearish. The old low of 1.8650 is now resistance as GBP/USD may head to 1.8400 on the continued downward trajectory.

[font='trebuchet ms', arial, sans-serif]Resist.1.8885

1.8769



1.8594



1.8537



1.8421

Support
[/font]






USDJPY

USD/JPY action overnight shows that the strong USD is slightly taking over the strong JPY as a theme as USD/JPY took out 102.30 resistance overnight. This puts USD/JPY in a possible short-term rally situation – with 102.75 as the next important resistance area. The maximum upside for now would appear to be 103.15. An eventual return to the downside is expected however, and an immediate return below 102.30 would erase the short-term rally chances for this pair and could put USD/JPY on the path to new lows toward 100.00.

[font='trebuchet ms', arial, sans-serif]Resist.103.01

102.51



102.70



101.51



101.01

Support
[/font]






EURJPY

EUR/JPY finally stopped for a small breath as the pair found support near the 133.30 lows. Still, no reason for bulls to get their hopes up, as the pair may run into resistance around 134.00. If that level doesn’t hold, a temporary spike higher to 135.00 can’t be ruled out. The major downside target is still 130.00 further out, with lower levels still even further down the road as a new major bear market is under way for this pair.

[font='trebuchet ms', arial, sans-serif]Resist.135.01

134.29



133.95



132.85



132.13

Support
[/font]






USDCAD

USD/CAD launched a fresh rally yesterday and may look to find support at 1.2200 today. 1.2250 provided resistance yesterday, but may not hold for long as the pair looks to head higher toward the 1.2460 top. 1.2650 is a higher target still a bit farther down the road.



[font='trebuchet ms', arial, sans-serif]Resist.1.2287

1.2224



1.2224



1.2098



1.2035

Support
[/font]






USDCHF

USD/CHF did find support at 1.1775 and headed to a marginal new top just short of the 1.1900 area overnight. Support is now around 1.1840 as the pair possibly looks to head to 1.2000+ in the near future.





[font='trebuchet ms', arial, sans-serif]Resist.1.1957

1.1886



1.1859



1.1743



1.1671

Support
[/font]






AUDUSD

AUD/USD broke convincingly lower through the 0.7550 support – which now becomes resistance. New lows may await this pair toward 0.7450 and eventually even 0.7360.

[font='trebuchet ms', arial, sans-serif]Resist.0.7679

0.7635



0.7533



0.7547



0.7503

Support
[/font]






NZDUSD

NZD/USD broke to a marginal new low around 0.6900 and could head lower still toward 0.6740 with 0.6950 as resistance.

[font='trebuchet ms', arial, sans-serif]Resist.0.7086

0.7031



0.6925



0.6921



0.6866

Support
[/font]




The support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.