The USD is mixed to open New York today after starting mildly better in Asia overnight; traders note initial disappointment from the G-20 meeting which announced nothing new and appeared to be simply a re-hash of the current economic situation created a brief push higher for the Greenback.

After testing previous resistance levels across the board the USD began a slide
through European trade and is weak at the start of New York with the
exception of USD/JPY. The rate is still holding the 98.00 handle after
testing the 98.50 area of reported supply with stops noted above but offers
continue to hold the rate back into an inside-range day so far. Traders note
firmer equities were adding a bit of lift to the pair but overall volumes
are light. High prints at 98.51 with lows on support at 97.54; option
expiries today may be helping to hold the rate around 98.00 area. USD/CHF is
lower with lows at 1.1809 and holding 1.1820 area in early New York; high
prints at 1.1915 were offered by technical traders in light volume. Should
the rate fail to hold the 1.1800 handle the next 24 hours I think a case can
be made that the rally to 1.1970 was a false break-out as there has been no
follow-through. USD/CAD is weaker holding 1.2660 area after low prints at
1.2643; traders note stops under the market were around the 1.2650 area but
bids supported suggesting buyers are still there on dips. High prints at
1.2797 were under the 1.2820 resistance area suggesting more technical trade
in the pair. EURO has rallied steadily overnight with high prints in early
New York at 1.3047 triggering stops above the weekly high around 1.2960 area
with aggressive buyers helping the rate firm above the 1.3000 area; traders
note large names on the bid on the dips suggesting more accumulation.
Aggressive traders can look to lighten up on open longs for a possible
correction from the 1.3030 area. GBP high prints at 1.4232 lifting to
overhead resistance around 1.4250 before falling back a bit; traders note
cross-spreaders for GBP crosses adding to the upside momentum. If the rate
can hold above 1.4200 analysts suggest a test of the 1.4400 area is in view.
In my view, the USD continues to work on a top but with the major pairs now
trading at or through overhead initial resistance a correction would be
reasonable to expect. Aggressive traders can sell a rally in the USD this
week if economic news is seen as USD-supportive; I don’t think the Greenback
has enough bid interest to hold onto this 3-year high. Flight-to-quality
buying is beginning to lighten up as progress is being made on the economic
issues and sentiment is beginning to change. Although the economic solutions
probably won’t make a real difference in the long run I think the perception
that work is getting done is helping to alleviate fear and panic buying of
USD. Look for the Majors to continue two-way but pullbacks should be brief
and hold above support areas.

GBP/USD Daily

Resistance 3: 1.4350

Resistance 2: 1.4320

Resistance 1: 1.4250

Latest New York: 1.4170

Support 1: 1.3860

Support 2: 1.3780

Support 3: 1.3720

Comments

Rate holds gains and makes new high overnight; stops seen above weekly highs
around the 1.4050 area. Tests support on the 1.3800 handle and attracts
solid bids traders say. Lows likely remain secure. Reversal off weekly lows
a positive technical but the volume needs to come up and I think the shorts
have yet to bail as a group. Traders report stops in-range adding for
two-way action. Long-term tech resistance now at 1.5000 area likely to cap
near term but stops are building above and the 1.5000 handle is a big
psychological number. 23 year lows are very likely to hold on any break with
long-term support at 1.3500 area now in play. Two-way action continues
suggesting that shorts are aggressively adding and longs are trying to find
a bottom. Short squeeze back on the board I think.

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

5:30am GBP DCLG HPI y/y

4:10pm GBP BOE Gov King Speaks

EUR/USD Daily

Resistance 3: 1.3100

Resistance 2: 1.3080

Resistance 1: 1.3050

Latest New York: 1.3035

Support 1: 1.2850

Support 2: 1.2720

Support 3: 1.2680

Comments

Rate follows GBP in two-way action, holding support now above the 1.2880
area. Upside stops triggered on the move over 1.2950/60 area with new buying
coming in above 1.3000 area. Overhead resistance is thick up to 1.3100 area
so a pullback might be in the works. Aggressive traders can liquidate some
longs above 1.3000 area and hold base positions. Traders note big names on
the buy side on dips overnight; semi-officials buying 1.2900 area. Close
above key 1.3030 area needed for further upside until then rallies likely to
be sold so expect more two-way action. Bulls are still attempting to find a
bottom. Technical levels around the 1.2920/50 area now likely to offer
resistance so expect two-way action and consolidation underneath.

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

6:00am EUR German ZEW Economic Sentiment

6:00am EUR ZEW Economic Sentiment

3:15pm EUR ECB President Trichet Speaks

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

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