Daily Analysis

Today’s US Dollar Trading
•    USD starts weak and reverses
•    FOMC announcement initially seen as positive
•    Stops seen driving trade

Overnight Preview

•    Look for USD to hold gains and consolidate
•    Volumes should be lighter

Looking Ahead to Thursday

All times EASTERN (-5 GMT)
•    8:30am USD Core Durable Goods Orders m/m
•    8:30am USD Unemployment Claims
•    8:30am USD Durable Goods Orders m/m
•    10:00am USD New Home Sales
•    10:30am USD Natural Gas Storage
•    Day 2 ALL WEF Annual Meetings


After dropping dramatically overnight and into early New York the USD has reversed to hold gains across the board against the majors. Most traders note that volumes dropped off significantly ahead of the FOMC rate announcement suggesting that most were sidelined ahead of the statement. Analysts are divided as to the exact meaning of the statement; some suggest that the Fed stands ready to do “whatever it takes” to resolve the economic crisis while others say the Fed appears a bit panicky in view of interest rates at near-zero unable to add positive stimulus so far. In my view, the issue still remains short-sighted at best and long-term solutions will be hard to enact with a financial community wanting a quick fix. As such, any Fed action will likely be short-lived and deepen the potential for recession; however at first blush the equities markets like the FOMC announcement and the USD is responding higher. GBP high prints at 1.4378 attracted sellers today with the rate dropping back to trade at the 1.4200 handle and looking like a reversal to test recent lows is in play. Traders note that LHS interest at the fix was largely ignored in thin conditions but sellers are currently active. EURO fared no better with high prints at 1.3329 ahead of FOMC; reversing hard to trade the 1.3100 area after the announcement. LHS interest was also reported in EURO suggesting that everybody kept their powder dry until the afternoon. Low prints at 1.3103 are still ahead of deeper support suggesting follow-on selling is due in Asia tonight. USD/JPY found close-in stops as expected above the 90.10 area for a high print at 90.76 before dropping back; traders note that technical resistance at 90.80 area appears to have held the advance suggesting that the stop-driven rally will need some active buying soon to extend into stops rumored to be at or near the 91.00 handle. Traders note that a short-squeeze is overdue and argue that today was an upside breakout from near-term resistance at the 90.00 handle. USD/CHF found stops above the previous support level at 1.1480 and continued to advance after the FOMC action; high prints at 1.1568 with lows still from overnight at 1.1329 suggesting the rate will try for resistance at the 1.1650 area again. USD/CAD found stops under the 1.2150/60 area early in the day for a low print at 1.2023 before rallying after FOMC; New York highs back over the 1.2200 handle are back above the previous support area suggesting that if the rate holds above the 1.2180 area into the close a rally may be in the works. Look for the USD to consolidate gains with an upward bias; more data due this week likely will be USD-negative so expect whipsaw and sell rallies.


Resistance 3:  1.4420
Resistance 2:  1.4380
Resistance 1:  1.4330/40
Latest New York: 1.4210
Support 1:  1.4120
Support 2:  1.4050
Support 3:  1.3980

Rate rallies to resistance at the 1.4330 area and corrects back after FOMC; USD appears to like the news but GBP holds support ahead of the close. Holding 23 year lows so far and a pullback likely to be bought so expect whipsaw. Light stops seen on the move over the 1.4250 area as late shorts get squeezed but big move still coming. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Short-squeeze likely in progress after first attempt to rally was sold back but recovers. Rate trading on technical’s now. 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 Thursday: All times EASTERN (-5 GMT)
2:00am GBP Nationwide HPI m/m
12:00pm GBP MPC Member Blanchflower Speaks
7:01pm GBP GfK Consumer Confidence


Resistance 3:  1.3420
Resistance 2:  1.3380
Resistance 1:  1.3320/30
Latest New York:  1.3137
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.  Rate then follows GBP lower on correction but major support at 1.3030 still the key. 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 Thursday: All times EASTERN (-5 GMT)
3:55am EUR German Unemployment Change
4:00am EUR M3 Money Supply y/y
4:00am EUR Private Loans y/y
5:00am EUR Consumer Confidence

Analysis by: – Written by Jason Alan Jankovsky

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pinions, market data, and recommendations are subject to change