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. 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.

GBP/USD Daily

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

Comments
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

USD/JPY Daily

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

Comments
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 by: Forexpros.com written by Jason Alan Jankovsky

Disclaimer:

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.