The USD ended the day weaker across the board but intraday volatility and whipsaw kept traders on their toes; most… … traders noting that large order to sell USD were moving through the markets and thin conditions exaggerated the moves.

Most desks report that stops and aggressive long-liquidation hit most pairs to drive prices
lower across the board; USD/CAD took a major hit dropping over 400 points for a low
print at 1.2124 before a bit of short-covering brought the rate back to the 1.2200
handle. Conditions were thin as expected and some traders report that firmer oil
prices help support the Loonie and EURO today. EURO almost traded 1.3000 today with
a high print at 1.2993 before dropping back as volatility dropped the rate back
under the 1.2800 handle briefly. Traders note that fears of a global slowdown plus
intervention to slow down the rise of the Yen helped underpin the rate but all eyes
were on the US FOMC rate announcement today. As expected the Fed cut rates but the
markets were expecting more than a 50 BP cut today; some desks report that the USD
was “disappointed” that the cut wasn’t larger but fed watchers note this leaves room
for the Fed to cut more later if needed and helps the recovery in equities. Although
the DJIA has had a two-way session and will close with only slight gains; after
yesterdays massive move the market likely needs to pause for a day or two and get
more information before extending the recovery if that is in the works. In my view,
the Majors are beginning to show signs that the bottom is in near-term but the
volatile nature and thin conditions in recent trade likely mean we will cover a lot
of the same ground twice. I would look for a pullback in EURO and GBP to buy and
certainly sell rallies in the USD pairs. For the day, GBP performed the best
crossing the 1.6400 handle and closing firm on the day. Traders note that
liquidation of Yen cross-trades likely supporting most pairs leaving the USD in a
corrective mode to end the week. Look for a quiet overnight session ahead of US GDP
data in the morning. Most traders are expecting a “recession-like” number so expect
more downside from the USD to end the week.

GBP/USD Daily

Resistance 3: 1.6650

Resistance 2: 1.6580

Resistance 1: 1.6500

Latest New York: 1.6400

Support 1: 1.5400

Support 2: 1.5250

Support 3: ?

Comments

Upside finds stops, volatility decreases a bit as today as market extends range in
good two-way trade. Traders note stops and unwinding of cross-spreads supporting the
rate. Follow-on selling finds bids at prior low. Bounce off the lows early in the
week leaves a healthy bid wick suggesting some upside coming. Traders note liquidity
is still thin. Rate at new resistance level but ranges appears wider. Traders note
quality bids on the dip suggesting a bottom is in finally but expect volatility.
Aggressive traders can buy anytime on weakness but expect more whippy action.
Two-way action likely to continue. Confirmed sovereign interest on the dip as
semi-officials seen on dips in both EURO and GBP recently; lately middle-east names.
Traders report cross-spreading for Sterling/JPY lifting the rate.

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

3:00am GBP Nationwide HPI m/m

8:01pm GBP GfK Consumer Confidence

EURO/USD Daily

Resistance 3: 1.3100

Resistance 2: 1.3050

Resistance 1: 1.300/10

Latest New York: 1.2957

Support 1: 1.2330

Support 2: ?

Support 3: ?

Comments

Rate begins to rally as ranges extend a bit to the upside; hook reversal showing
from the toolbox suggests aggressive traders can buy the rate on dips. Rate possibly
getting spillover effect from GBP. Overnight equities stronger also helping to lift
the rate a bit. Support also from cross-spreaders as they unwind Yen. Official
interest noted traders say. Rate is an absolute screaming buy in my view—I can’t see
further weakness being ignored by the buyers; conditions are almost right to buy on
the net pullback. Oil pressure likely 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.

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

4:55am EUR German Unemployment Change

6:00am EUR Consumer Confidence

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

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