Daily Analysis

Today’s US Dollar Trading
•    USD holds gains amid whipsaw
•    GBP holds above 1.3900 into the close
•    Equities drop, volumes light

Overnight Preview

•    Look for consolidation
•    USD to hold at highs the next 24-48 hours

Looking Ahead to Wednesday

All times EASTERN (-5 GMT)
•    10:00am USD Treasury Sec Nominee Geithner Speaks
•    1:00pm USD NAHB Housing Market Index

The USD continued its climb against the majors today reaching the best levels of the day late against most pairs after suffering a setback earlier today. Weaker equities offered a bit of pressure as USD/JPY fell back through the 90.00 area late to make lows at 89.73; volumes remain light and traders note that the rate is due for a short-covering rally suggesting that a low-volume dip today may be the lows for the week. High prints overnight at 90.99 went unchallenged in New York trade. EURO held up better than the GBP today making highs overnight in Asia at 1.3104 and lows late in New York at 1.2855; traders note that technical support is strong at 1.2850 area and expect a bounce from this area to gain momentum on a rise over 1.3020/30 area of previous support. Traders also note solid two-way flows and aggressive bids from quality names on the move into the low 1.2900 area during the day. In my view, aggressive traders can buy EURO anytime under the 1.2900 handle. GBP briefly rallied to print a New York high at 1.4040 area before dropping back on high volatility to the 1.3900 area; traders note that conditions were thin all day and may have exaggerated price swings. Cross-spreaders dominated trade overnight but may have backed off on aggressive selling as the major GBP crosses came off their highs later in the day. USD/CHF had a technical failure today as the highs at 1.1521 failed to attract aggressive buying leaving the rate vulnerable to a sell off neat-term; high prints were on lower volume and the rate finished near the 1.1470 area just barely over the 50 day MA suggesting a point of potential reversal . USD/CAD rallied along with USD strength elsewhere no doubt helped by the 50 BP cut in interest rates by the BOC early this morning; high prints at 1.2700 even were offered aggressively after the rally dropping the rate back under the 1.2600 handle for a few hours into the London fix. Technical buyers likely showed up to lift the rate back to the 1.2650 area as that was previous resistance now hoping to become support. In my view, the rate is due for a sell off and the failure at 1.2700 is important because it suggests the rate cut was factored in. In my view, today’s USD action was likely euphoria over the new president and the hope of a better tomorrow. If you look historically the USD has rallied in the first few months of a new presidents’ term but has fallen after the “honeymoon” was over. President Obama has an impossible situation to solve by government action and has little or no plan to create a solution; once reality settles in the USD will suffer a downturn because it doesn’t take a rocket scientist to see that a depression is in the works and the only solution is to weaken the Greenback moving forward. Look for the USD to consolidate overnight and fail at the highs the next 48 hours.

GBP USD Daily  

Resistance 3:  1.4600
Resistance 2:  1.4520/30
Resistance 1:  1.4450
Latest New York: 1.3915
Support 1:  1.3850
Support 2:  1.3800/10
Support 3:  1.3760


Rate falls hard as cross-spreaders sell GBP across the board. Overnight economic news seen as neutral; some rumor of UK bank downgrades adding pressure. Sell-signal from toolbox validated suggesting a test of the next major support area around the 1.3850 to 1.3780 area. Signs of the bottom after holding the 1.4500 handle last week negated near-term with offers likely back at the sell zone around 1.4450 area now. Cross-spreaders continue to sell GBP across the board. Volumes continue light on this break. Spillover from EURO likely. Look for two-way action into this bottom. A short-covering rally is increasingly likely now; looking for signs of late sellers.  
Data due Wednesday: All times EASTERN (-5 GMT)
4:30am GBP MPC Meeting Minutes
4:30am GBP Average Earnings Index 3m/y
4:30am GBP Prelim M4 Money Supply m/m
4:30am GBP Public Sector Net Borrowing
4:30am GBP Unemployment Rate

Resistance 3:  1.3200/10
Resistance 2:  1.3180
Resistance 1:  1.3100/10
Latest New York:  1.2886
Support 1:  1.2850
Support 2:  1.2800/10
Support 3:  1.2780


Rate two-way despite sharp fall in GBP; likely cross spreaders supporting on the dip as active sellers attempt to push the rate lower into major support around the 1.2780 area. Bottom may be forming around under the 1.3030 area as the drop into the 1.2900 handle was on thin volume. 50 bar MA failed now likely to offer resistance and a close above suggests the bottom will be in. Sell signal from the toolbox validated by the drop but be cautious as trend line support approaching. Semi-official and sovereign bids and offers seen overnight. Technical levels around the 1.3300 area now likely to offer resistance so expect two-way action and consolidation. Look for a solid bounce from here. Aggressive traders can look to buy the next dip.
Data due Wednesday: All times EASTERN (-5 GMT)
2:00am EUR German PPI m/m
3:00am EUR ECB President Trichet Speaks
4:00am EUR Italian Trade Balance
4:30am EUR ECB President Trichet Speaks

Forex – Written by Jason Alan Jankovsky

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.