The USD continued lower across the board today after equities failed to respond positively to government steps taken to restore… … confidence; DJIA was down over 300 points at mid-day and remained deeply in the red into the final hour of trading today.

US housing data continued to show weakness in the housing sector but traders were unconvinced that the slightly lower
numbers indicate a potential bottoming in the troubled housing markets.
Finding stops on a breakout higher, GBP and EURO rallied to new daily and
weekly highs as the USD wilted further during New York trade; GBP high print
at 1.8245 dragging EURO higher for a high print at 1.4385 before selling
from longs capped the move into the afternoon. Traders note that volumes
improved during the day and order-flow was considered orderly. USD/JPY
remained inside existing weekly ranges but managed a low print at 104.36
before recovering slightly to trade the 105.00 handle late; traders note
cross-spreading was the main driver of volatility during the day today.
Swissy extended weekly losses to a 1.0992 low print before bouncing slightly
as the technical picture suggested an objective from the highs may have been
reached; traders note that the rate has likely been pressured from the
advance in Gold. Oil prices advanced today as well which likely supported
the EURO and pressured equities but the market is still below the
psychological point of $100/BBL at $97.00; traders note that higher prices
will likely support EURO through the end of the week. The one higher
performer on the board was USD/CAD scoring a 108.11 high print before
reversing hard to fall back under the 107.00 handle to close lower on the
day; traders note the rate had aggressive selling into the highs by large
names. In my view, today's USD action significantly underscores the
fundamental weakness of the USD despite the recent euphoric rally. Traders
note that volatility has been very high and the majors continue to respond
with higher action suggesting that the dips will continue to be bought
near-term. Look for the USD t0 continue lower overnight and through the end
of the week. Tomorrows US data is the last for the week so expect Friday to
be volatile as traders will likely cover open trades to end the week.

GBP/USD Daily

Resistance 3: 1.8350

Resistance 2: 1.8300/10

Resistance 1: 1.8250

Latest New York: 1.8196

Support 1: 1.7730

Support 2: 1.7620/30

Support 3: 1.7580

Comments

Rate rallies hard as stocks wilt, cross spreading also noted. Sovereign
interest under the 1.7850 area this morning lifted into stops above the
1.8100 area. In my view, the GBP has weathered the storm fairly well and it
suggests no additional down move near-term. Cross spreaders seen active on
the sell side but volumes lighter. OK to buy the rate the next 24 hours and
I would look for a dip under the 1.7830 area for the buy but that looks
unlikely after the rally today. Traders note stops mixed with offers above
the market also. Major support has held last Friday, any weakness likely to
be bought hard. Profit-taking bids continue as well. Hook reversal from the
toolbox still valid. Short-covering rally may be over due to sharpness of
the move. Close back above the 1.8100 area likely turns the rate positive.

Data due Thursday: All times EASTERN (-4 GMT)

4:00am GBP MPC Member Dale Speaks

4:30am GBP Retail Sales m/m

4:30am GBP M4 Money Supply m/m

4:30am GBP Public Sector Net Borrowing

EURO/USD Daily

Resistance 3: 1.4480

Resistance 2: 1.4430

Resistance 1: 1.4380/90

Latest New York: 1.4336

Support 1: 1.4080

Support 2: 1.4000/10

Support 3: 1.3940/50

Comments

Rate rallies away from support, some upside drawn from Cable no doubt.
Expect more two-way action but the next dip could be larger after today's
rally. Traders note the rate is firm on dips so far despite the uncertainty
in the market. Some sympathy trade from GBP; lows likely in finally from
last week. Volumes better during the day. Traders report offers in size
being absorbed. Traders suggesting that the rate is trading technically.
Market likely beginning to correct oversold condition with this rally; close
over the 1.4500 area can't be ruled out this week. Rate continues to track
Cable and vice-versa. Now that more stops are cleared a rotation higher is
even more likely. Remaining US data this week likely to be unfriendly so be
ready for more whipsaw but expect a solid higher close for the week. If
long, look to add to positions on any weakness.

Data due Thursday: All times EASTERN (-4 GMT)

NONE

Analysis provided by: http://www.Forexpros.com – Written by Jason Van
Jankovsky

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