A very quiet two-way session left the USD slightly lower from Friday's closing levels against the majors; traders note that… … the holiday thinned conditions contributed to the lack of interest either way.

On the day, after what would have been the London fix, the USD fell into some active selling
as the rate cleared below initial opening levels seen in Asia; traders
suggesting that model and momentum accounts were liquidating late long
positions when the USD saw no follow-through after the initial push higher
on the day seen around the release of the ISM Services numbers this morning.
Coming out a bit better than forecast the USD rallied on the news but was
unable to hold gains and quickly fell back to test lows. EURO was able to
clear above the 1.5500 handle for a high print in late trade at 1.5520
recovering a full handle off the 1.5422 low print; traders say there was no
real reason for the move other than short-covering and that was likely
exacerbated by the thin conditions. Cable initially broke to fresh lows at
1.9653 but then began a slow-steady march until reaching the opening range
before popping higher on technical trade; closing above the 1.9700 handle
leaves a “doji” point of indecision today suggesting the rate is poised to
rotate higher near-term. If short the GBP; I would cover and re-set shorts
after the rally that seems sure to happen overnight. USD/JPY tried again for
the 105.60/80 area with a post-news high print at 105.63 but was again
turned back; even with Japan closed today exporters were no doubt on the
offer. The rate fell into support at the 105.10/20 area for most of the day
before falling to pressure seen in other rates; low prints at 104.72
continue to support the 104.80 area but traders feel confident the stops
seen under the 105.00 are only the early longs getting out. Traders feel
bids extend to 104.50 area with large stops likely in the 104.30/40 area;
look out below if those trigger this week as a technical top would form in
the USD. Swissy and Loonie both lower as well with Loonie holding above the
1.0100 handle again despite good offers all the way down to the lows at
101.18; most likely stops are under the 1.0100 area. Swissy is well off the
overnight highs of 1.0598 making lows in New York at 1.0509 and closing near
the lows. In my view, the USD is off to a defensive start and if you are
holding shorts from last week look to add on any strength; it's my view the
Greenback is headed for support by the end of the week.

GBP/USD Daily

Resistance 3: 1.9820
Resistance 2: 1.9780
Resistance 1: 1.9740/50
Latest New York: 1.9722
Support 1: 1.9650/60
Support 2: 1.9600
Support 3: 1.9550

Comments
Rate drops under the 1.9700 handle to start, look for a test of the 1.9600
area within 24 hours. Close under the 1.9700 handle again needed to wash
out the longs. Bounce back to trade at or near the 1.9720 area into the
close suggests a rally is coming.
Upside remains limited in my view but ranges can be wide as evidenced by the
past few days of trade. Sell rallies if not short; buying dips dangerous.
Drop to under the MA's very important, long selling wick makes sell side
attractive for further losses. Need down bars with higher volume to confirm;
not getting that today.
Some pressure from EURO remains. Cross-spreading for Yen, Swissy and EURO
evident; look for additional sell-off to end the week. NFP today increased
volatility and negative close is great for follow-through Monday

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

4:30am Services PMI 51.7
7:01pm Consumer Confidence Index 74

EURO/USD Daily

Resistance 3: 1.5600/10
Resistance 2: 1.5550/60
Resistance 1: 1.5520
Latest New York: 1.5492
Support 1: 1.5400/10
Support 2: 1.5350/60
Support 3: 1.5300

Comments
Additional selling to new low early, Rate clears stops again and attracts
active selling after 1.5400 area falls; Strong long-liquidation break is
still coming; test of the lows as expected. Watch for two-way volatility. Be
ready to add quickly if a rally happens; close under the 50 bar MA could
attract active selling. Continue to hold shorts and look for a
short-covering rally to stall around the 1.5550/1.5600 area; look to add to
open shorts in that area.

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

4:00am Services PMI (r) 51.8
5:00am PPI m/m 0.6%

Analysis by: Forexpros.com written by Jason Alan Jankovsky

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