The USD continued to advance against most majors but lost ground against Yen to end
the day mixed and at new… … highs for the year. Stops were triggered in thin trade
traders report suggesting that some bottom-picking has been done recently but the
relentless one-way USD advance today made quick work of the USD bears today. Traders
report that conditions were horrible and volumes almost non-existent suggesting that
a potential bottom is once again forming. With most traders focusing almost
exclusively on liquidity, bank lending and the financial crisis, it appears evident
that finding a USD bear will be hard work. In my view, the charge higher by the USD
is suspect because it can’t last due to the underlying fundamentals being what they
are. Lately traders have ignored US economic data preferring to trade on rumor and
conjecture; tomorrow is regular unemployment and Friday is Existing home sales; both
expected to be negative for the Greenback. On the day, Cable sank like a stone for a
low print at 1.6138 after the London fix as more dovish rhetoric from the BOE
filtered through the markets. Traders note that order boards are blank after the 500
point move overnight and the 1200 point move the past 48 hours; most are looking for
a bounce to at least hang a hat on. EURO likely fell in sympathy although some
suggest the EURO led the decline; either way the EURO dropped through the 1.3000
handle for a low print at 1.2737 before a bounce was seen. Traders report model
accounts selling the rate under the 1.2900 area. USD/CHF rallied also for a high
print at 1.1714 in NY before falling back on profit-taking; mist expect a test for
stops again over the 1.1720 area near-term and that may finally be the sell for a
potential top. USD/JPY fell in line with equities weakness; the DJIA losing 460
points on the day heading into the close. Low prints in USD/JPY at 97.29; aggressive
traders can sell more on the close at the 97.50 area. In my view, the USD rally has
got to be nearing the end of this move; fundamentals don’t support it and the
financial crisis is showing signs of mitigating as some banks are returning to
normal operations. Once USD bulls figure out they are holding expensive USD I think
at least a small correction will force a top in the rate. Look for quiet overnight
action as volumes are light and a steady open in NY tomorrow ahead of US data.

GBP/USD Daily

Resistance 3: 1.6800

Resistance 2: 1.6730

Resistance 1: 1.6500

Latest New York: 1.6234

Support 1: 1.6130

Support 2: ?

Support 3: ?

Comments

Follow-on selling surprises to the downside; stops cleared and orders thin. Traders
note solid bids but offers remain. Rate at new support level but ranges appears
wider. Drop under the 1.6500 handle finds light stops. Monthly lows give way as
sentiment won’t rally. Traders note quality bids on the dip suggesting a bottom is
in here somewhere. Aggressive traders can buy anytime but expect more whippy
action. Follow-on selling likely from technical’s but spillover strength from EURO
likely to be better to end the week. Look for a recovery back to the 1.8000 handle
near term; two-way action likely to continue. Confirmed sovereign interest on the
dip last night as semi-officials seen on dips in both EURO and GBP recently. Traders
report cross-spreading for Sterling crosses likely driving the rate near-term.
Model accounts seen selling GBP and EURO overnight.

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

4:30am GBP Retail Sales m/m

4:30am GBP BBA Mortgage Approvals

Tentative GBP MPC Member Gieve Speaks

EURO/USD Daily

Resistance 3: 1.3300

Resistance 2: 1.3120/30

Resistance 1: 1.3060

Latest New York: 1.2832

Support 1: 1.2735

Support 2: 1.2660

Support 3: ?

Comments

More lows overnight; stops drive trade into next technical support. After all is
done today the rate is unchanged from US opens. Option barriers reported on the dip
but those are cleared. Model accounts seen selling the rate under the 1.2800 area.
Official interest noted traders say but rate continued to sell-off. OK to look to
the buy side now; rotation off the lows will likely signal a near-term bottom. Rate
is an absolute screaming buy in my view—I can’t see further weakness being ignored
by the buyers. Oil two-way spills over into pricing and if oil rallies it might take
EURO with it. Traders note stops building above the market along with offers. Expect
more two-way action with upside bias; traders note the rate is finding profit-taking
bids on dips so far despite the uncertainty in the market. Traders suggesting that
the rate is continuing to trade technically. Traders note official names overnight
this time.

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

2:45am EUR French Consumer Spending m/m

4:00am EUR Current Account

5:00am EUR Industrial New Orders m/m

9:00am EUR Belgium NBB Business Climate

Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time
(GMT -6)

Analysis by: http://www.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.A