Daily Analysis

Today’s US Dollar Trading
•    USD starts better in Asia, gives back gains in New York
•    Some whipsaw seen on light stops and thin conditions
•    Most eyes focused on FOMC tomorrow

Overnight Preview

•    Look for continued sideways action
•    Should get quiet ahead of FOMC tomorrow

Looking Ahead to Wednesday
All times EASTERN (-5 GMT)
•    10:30am USD Crude Oil Inventories
•    2:15pm USD FOMC Statement
•    2:15pm USD Federal Funds Rate
•    Day 1 ALL WEF Annual Meetings

The USD is continuing in two-way action as the majors continue to consolidate off their weekly lows; traders note conditions remain thin and the lack of US fundamentals are keeping some sidelined ahead of the FOMC rate announcement tomorrow. After early gains in the Greenback overnight better-than-expected overseas data helped to hold the GBPO and the EURO higher although both pairs looked for new lows in early New York but reversed losses to close better on the day as early intraday shorts covered back as the day wore on. Better US equities prices helped to support EURO as well keeping the rate off the lows into the close. GBP overnight lows went unchallenged in New York trade at 1.3928 but the rate followed EURO lower as EURO made new lows at 1.3118 but spent very little time on the lows rallying back to trade the 1.3180 area for most of the day. High prints in GBP at 1.4245 remained unchallenged in New York making the day a net higher day but off the highs to finish 1.4140 area. USD/JPY had a more rangey day topping out at 90.08 overnight and making lows in New York at 88.42 only to finish about unchanged on the day. Traders note that volumes were thin everywhere and despite better tone of stocks no one wanted to get on the buy side in size today. Technical trade in USD/CHF continued to define near-term direction as the rate failed to extend in either direction today with lows at 1.1312 overnight and highs at 1.1437 with a mid range close; traders say concern over SNB potential intervention is keeping a base under the markets but note that stops are building under the 1.1280 area to the downside and about 1.1480 on the upside making for potential whipsaw. Same story in USD/CAD in thin conditions as well; high prints at 1.2335 during New York with a drop back to unchanged on the day after lows in Asia at 1.2150; large range today mostly due to thin conditions traders say. For the most part today was a point of indecision for the USD; highs failed to attract buyers and lows found no sellers. Stops in all pairs were light and likely residual suggesting short-term time frame traders active with big players sidelined ahead of more news due later this week. Look for the Greenback to continue sideways and consolidate tonight; volumes should remain light and most traders will be focused on FOMC in the afternoon Wednesday.


Resistance 3:  1.4380
Resistance 2:  1.4300
Resistance 1:  1.4250
Latest New York: 1.4176
Support 1:  1.3550
Support 2:   1.3500/10
Support 3:   ?


Rate rallies to resistance at the 1.4250 area and falls back to leave a huge wick. Holds lows so far but a reversal could be in the works if the sort-squeeze is over. Light stops seen on the move over the 1.4100 area as late shorts get squeezed. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Stops and aggressive selling drive the rate to a 23.0 year low last week. Short-squeeze likely in progress after first attempt to rally was sold back but recovers. Overnight economic news seen as positive; rate trading on technical’s now that a pullback from the 1.4250 area is in the works. Signs of the bottom may be showing up as “smart” buyers reported in GBP Wednesday and Thursday night last week. Spillover from EURO likely but modest. Look for two-way action into this bottom. A short-covering rally is increasingly likely now. Late sellers likely in or hurting.  
Data due Wednesday: All times EASTERN (-5 GMT)

Resistance 3:  1.3420
Resistance 2:  1.3380
Resistance 1:  1.3320/30
Latest New York:  1.3206
Support 1:  1.3030
Support 2:  1.2950
Support 3:  1.2880

Rate follows GBP higher; scores highs overnight Europe but fails into early New York. Recovers late in the day suggesting short-term players on the short side covering back. Rally less volatile and the rate holds tech resistance at 1.3325/30 area overnight. Rally all day today suggests a short-squeeze is in the works; fall back argues the squeeze is over. Stops around 1.3030 area likely under the market. More likely in-range but probably cleared on the pullback from highs. Bulls are attempting to find a bottom. 50 bar MA failed now likely to offer resistance and a close above suggests the bottom will be in. Semi-official and sovereign bids and offers seen last week. Technical levels around the 1.3300 area now likely to offer resistance so expect two-way action and consolidation. Aggressive traders can look to buy the next dip.
Data due Wednesday: All times EASTERN (-5 GMT)
2:00am EUR GfK German Consumer Climate
All Day EUR German Prelim CPI m/m

Analysis by: – Written by Jason Alan Jankovsky

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