Despite neutral-to-better US data today the USD was unable to extend gains from yesterday and ended the day mixed. Better… … against GBP, the Greenback pushed Cable into early lows at 1.9424 after clearing stops under the 1.9500 handle in Europe.

Traders note that cross-spreaders are on the offer and
most of the action was related to non-USD pairs. Although the rate was on
the defense most of the day traders report nice bids from sovereign names
supported on every dip. Offers are said to be building around the 1.5480
area with stops layered above suggesting that late shorts are playing a very
tight stop. EURO fell back a bit but was supported as well on dips; low
prints at 1.5418 were never challenged and as oil prices rose and fell so
did EURO making for whippy trade. Traders note that Russian names were
active matching other calls for sovereign interest on the lows. Analysts
remind that the 1.5500 area likely to offer at least one pullback if the
rate rallies but stops are just above suggesting late shorts are running
tight risk control similar to GBP. USD/JPY had a tight two-way range today
but still inside yesterday; finishing back above the 105.00 handle at around
the 105.15 area; large bids said to be under the rate around the 104.40 area
but lows at 104.52 left those unchallenged. Traders note that volumes were
light on the day and that down action appears to have some teeth to it but
caution that the stops are still higher; roughly the 105.50/60 area. Could
have some whipsaw also overnight. Swissy was firm around the 1.0420 area to
end the day after bids were uncovered in the 1.0350/60 area this morning.
Positive ADP data lifted the USD off of the lows but offers above the 1.0440
area contained the rally. Traders expect overhead resistance to hold but the
rally could extend to 1.0520 area near-term. In my view, the USD went
nowhere today and with good news out of the way it is likely that NFP will
disappoint. How the market trades the next 24 hours is important to the
set-up; I am looking for quiet two-way action to end in USD weakness by this
time tomorrow. I don't think the Greenback has what it takes to lift into
new weekly highs when facing down a serious piece of data later this week.
Should be a quiet overnight session;

GBP/USD Daily

Resistance 3: 1.9720
Resistance 2: 1.9680
Resistance 1: 1.9630/40
Latest New York: 1.9545
Support 1: 1.9520/30
Support 2: 1.9500
Support 3: 1.9480

Comments
After all was said and done today, the GBP traded mostly sideways on light
volumes. Dips were bought by large names traders say. Stops drive rate into
the lows but bids and rumors of sovereign buys hold rate at the 1.9450/60
area on light volume to start New York. Trading in sympathy with EURO
continues and EURO strength likely to spillover eventually into cable.
Stopped out of longs overnight; OK to look at the long side again as support
may be forming at current levels; might want to wait 24 hours. Lots of
potential for day traders the next 24-48 hours as the rate is likely to stay
range bound ahead of US data later in the week. Continue to expect a lot of
sympathy trade with EURO; the cross-spreaders are having a field day with
the Sterling crosses and I think the GBP may track EURO near-term. Expect
continued whipsaw around US news this morning. Bernanke comments a total
head-fake in my view.

Data due Thursday: All times EASTERN (-5 GMT)

Tentative GBP Halifax House Price Index m/m -1.1%
Tentative GBP MPC Rate Statement
7:00am GBP Official Bank Rate

USD/JPY Daily

Resistance 3: 105.80
Resistance 2: 105.50/60
Resistance 1: 105.30
Latest New York: 105.27
Support 1: 104.40/50
Support 2: 104.00/10
Support 3: 103.70/80

Comments
Rate is stuck in-range; no follow-through either way but longs getting
nervous I think. Expect more selling on overnight strength. Hold
shorts-nothing to do but wait as the bulls run for the exits. Model accounts
on the bid last night a good sign the rate will fall back. Expect lots of
two-way action and the rate is likely to cover a lot of the same ground
twice the next 24-48 hours. This week's data may be largely ignored until
NFP out later in the week. Longs likely rolling stops up underneath close-in
so expect volatility later today.

Data due Thursday: All times EASTERN (-5 GMT)

Analysis by: Forexpros.com written by Jason Alan Jankovsky

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