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Old 06-18-2008, 07:41 PM
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Default Daily Analysis - 18/06/2008

Read the Daily Forex Trading Analysis

Today’s US Dollar Trading
• Overseas data USD negative
• USD rally falters in US trade
• Volumes lighter

Overnight Preview
• USD likely to remain technical in nature
• Look for more downside pressure

Looking Ahead to Wednesday
All times EASTERN (-5 GMT)
• 10:35am USD Crude Oil Inventories

The USD whipsawed today initially falling in Asia and then rallying in Europe before falling back again during New York trade. Not a lot of news supported the trade action today; overseas news was mostly supportive to the EURO and the GBP but both of them were under selling pressure early. US data this morning was USD neutral to negative but the Greenback held gains initially. Although the USD fell back to suffer minor losses against Swissy, Loonie and JPY—the USD held good gains against the GBP as UK data and rhetoric caused a stop-driven panic ahead of US trade today. Falling all the way down to a 1.9468 low print after a high at 1.9700 today’s GBP trading can only be described as “whipsaw”. The GBP recovered to trade 1.9580 into the close in New York making a mess of most balance sheets. Forex traders note that stops were run in both directions suggesting that the rate was long into the highs and then short into the lows. Leaving a long bid-tail like today’s action argues for more upside follow-on buying tomorrow. With a light economic calendar it is likely that trade will be technical the next 24 hours but with an upside bias. EURO rallied to the 1.5553 area before falling back with Cable but rallied into the end of the day again to close above the 1.5510 area suggesting more upside to come tomorrow. In my view, the majors head-faked everybody today and more losses for the USD are coming. Today’s data was seen as mildly neutral to slightly bearish and I think that most traders were temporarily focused on UK and Eurozone data this morning; once the PPI and Current Account data sink in and are compared with the poor housing data I think a further decline in the Greenback will be warranted. Look for the USD to sell off the next 24 hours or so. If holding longs in the majors get ready to add to open positions as more gains are coming I think.


Resistance 3: 1.9700
Resistance 2: 1.9650
Resistance 1: 1.9600/10
Latest New York: 1.9568
Support 1: 1.9500/10
Support 2: 1.9450/60
Support 3: 1.9420

Rate bounces off support at the 1.9470 area; leaves a long bid wick suggesting the downside is a head-fake. Comments from BOE reverse the rate as traders panic on the sell-side. If long, need to be patient and wait for the panic to subside and the rally to resume. Rate finds stops layered under the 1.9600 area all the way down into active selling under the 1.9500 handle; if this selling is absorbed then the rate will recover fairly quickly I think. Rumors of UK inflation concerns keeps the rate buoyed above 2008 lows. Likely cross-spreaders on the move. A bounce is likely and aggressive traders can ADD if not already long. Spillover weakness from EURO still likely as would be strength. Continue to expect a lot of cross-trading; the cross-spreaders are having a field day with the Sterling crosses and I think that will continue through this week and into the next.

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

4:30am GBP MPC Meeting Minutes
6:00am GBP CBI Industrial Trends Orders
2:30pm GBP BOE Governor King Speaks


Resistance 3: 109.20
Resistance 2: 108.80
Resistance 1: 108.50/60
Latest New York: 107.95
Support 1: 107.60/70
Support 2: 107.20/30
Support 3: 106.80

Exponential reversal signal overnight, need to sell the rate. Close under the 108.00 area significant; look to add if rate can hit the stops in the 107.40/50 area near-term. Some topping seen; expect volatility. Today’s close under the 200 bar MA likely to draw some sympathy selling but watch volumes. Bids appear solid but so do offers; exporters on the offer all the way to the top overnight and active the past several days. Option defense noted at 107.80 through 108.20; but that has fallen this morning. Technical traders note fib defense area around today’s highs and never forget that the fundamentals haven’t changed one bit in the last week or so. USD likely not this strong but more benefiting from Yen weakness. Can the rate top at the 108.50 area? Stops likely rolled up under the 107.40 area again for today so if a break happens—look for a drop to the 106.00 handle fairly quickly. Bulls likely to take gains by end of day if rumored stops above the 108.60/70 area are left untouched.

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

7:50pm JPY All Industries Activity Index m/m

Analysis Provided by: written by Jason Alan Jankovsky.

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Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
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