Today’s US Dollar Trading

Today’s US Dollar Trading
• USD consolidates firmer in two-way action
• Recovers overnight losses in New York trade

Overnight Preview

• Expect more book-squaring and consolidation ahead of Philly Fed

Looking Ahead

• 9:00 AM VDT Thursday Philly Fed forecast -18.0

The USD ended the day mixed in New York after giving back a lot of the previous day’s gains overnight; traders note thin conditions may have exaggerated the moves. Initially following through firmer in Asia the Greenback came under renewed selling as Europe got underway as many late sellers continued to stick with the “sell rallies” approach to recent price action. Large names were seen on the offer for USD and for a time it looked like the Greenback may not hold the gains but after New York got started the USD short covering continued to absorb offers. The GBP was the big mover on the day dropping through several layers of support and finding a lot of stop-driven trade; overnight highs at 2.0153 were never challenged and once the weekly lows gave way the rate never looked back dropping to a low print after the London fix at 1.9805 near the end of the day. Traders note that although stops were mostly providing the selling interest traders do say that aggressive new selling was seen under the 1.9850 area as late longs threw the towel in once the rate passed the “major” near-term support levels. EURO also found stops as expected at the 1.5600/10 area and quickly dropped to a low print at 1.5581 before bouncing smartly back to the 1.5640 area and traders thought that the EURO was not going to follow cable lower but the rate couldn’t hold the brief rally out of the hole; EURO dropped back under the 1.5600 area and held just off the lows making a very strong “sell” signal on the daily charts. Additionally, the rate now has an outside bar hook reversal on the weekly charts making a very bearish picture for the rate for the rest of the week. USD/JPY rallied for a high print overnight back above the 100.00 handle at 100.46 but the general selling hit the rate hard for a 300 point range and a low at 97.66; the rate recovered back to close on the 99.00 handle making a strong buying wick on the day. In my view, the correction back into the potential lows followed by a rally higher for the Greenback very clearly make the argument that the near-term USD selling is over and the relief rally is now in play. Look for more consolidation in two-way trade overnight with an upside bias for USD. Aggressive traders can add again to their open GBP shorts on a rally back to the 1.9900 area as the weekly S/R for 1.9950 should offer a ceiling.


R3:  2.0000
R2:  1.9940/50
R1:  1.9880
Current Price: 1.9805
S1:  1.9750/60
S2:  1.9720
S3:  1.9680

Rate breaks hard to end the bulls attempt to control the market; not much support ahead of the 50 bar MA which will likely offer a bounce. Look for a short-covering rally off the 50 bar MA but a failure at the former weekly support at 1.9950 area. Aggressive traders can ADD to open shorts on a bounce as the selling is likely to force a move to support at 1.9400 area within days or a week or so; there is a lot of stored energy on the rally that is late buyers in my view; they will likely bail quickly if they haven’t begun. 


R3:  1.5780
R2:  1.5720/30
R1:  1.5660
Current Price:  1.5603
S1:  1.5580
S2:  1.5550
S3:  1.5500/10

Rate likely to draw active selling now that the weekly low has failed and stops were elected all the way down to the 1.5580 support area, there has been no buying and conditions are thin suggesting that the longs are standing pat and late longs are getting stopped out. Deeper stops at the 1.5500/10 area are likely to be next on aggressive selling should stops under the 1.5580 area get triggered. Upside limited in my view as technical patterns are potentially bearish.

Analysis by: written by Jason Alan Jankovsky

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