The USD is continuing in two-way action as the majors continue to consolidate off their weekly lows; traders note conditions remain thin and the lack of US fundamentals are keeping some sidelined ahead of the FOMC rate announcement tomorrow.

After early gains in the Greenback overnight
better-than-expected overseas data helped to hold the GBPO and the EURO
higher although both pairs looked for new lows in early New York but
reversed losses to close better on the day as early intraday shorts covered
back as the day wore on. Better US equities prices helped to support EURO as
well keeping the rate off the lows into the close. GBP overnight lows went
unchallenged in New York trade at 1.3928 but the rate followed EURO lower as
EURO made new lows at 1.3118 but spent very little time on the lows rallying
back to trade the 1.3180 area for most of the day. High prints in GBP at
1.4245 remained unchallenged in New York making the day a net higher day but
off the highs to finish 1.4140 area. USD/JPY had a more rangey day topping
out at 90.08 overnight and making lows in New York at 88.42 only to finish
about unchanged on the day. Traders note that volumes were thin everywhere
and despite better tone of stocks no one wanted to get on the buy side in
size today. Technical trade in USD/CHF continued to define near-term
direction as the rate failed to extend in either direction today with lows
at 1.1312 overnight and highs at 1.1437 with a mid range close; traders say
concern over SNB potential intervention is keeping a base under the markets
but note that stops are building under the 1.1280 area to the downside and
about 1.1480 on the upside making for potential whipsaw. Same story in
USD/CAD in thin conditions as well; high prints at 1.2335 during New York
with a drop back to unchanged on the day after lows in Asia at 1.2150; large
range today mostly due to thin conditions traders say. For the most part
today was a point of indecision for the USD; highs failed to attract buyers
and lows found no sellers. Stops in all pairs were light and likely residual
suggesting short-term time frame traders active with big players sidelined
ahead of more news due later this week. Look for the Greenback to continue
sideways and consolidate tonight; volumes should remain light and most
traders will be focused on FOMC in the afternoon Wednesday.

GBP USD Daily

Resistance 3: 1.4380

Resistance 2: 1.4300

Resistance 1: 1.4250

Latest New York: 1.4176

Support 1: 1.3550

Support 2: 1.3500/10

Support 3: ?

Comments

Rate rallies to resistance at the 1.4250 area and falls back to leave a huge
wick. Holds lows so far but a reversal could be in the works if the
sort-squeeze is over. Light stops seen on the move over the 1.4100 area as
late shorts get squeezed. Two-way action continues suggesting that shorts
are aggressively adding and longs are trying to find a bottom. Stops and
aggressive selling drive the rate to a 23.0 year low last week.
Short-squeeze likely in progress after first attempt to rally was sold back
but recovers. Overnight economic news seen as positive; rate trading on
technical’s now that a pullback from the 1.4250 area is in the works. Signs
of the bottom may be showing up as “smart” buyers reported in GBP Wednesday
and Thursday night last week. Spillover from EURO likely but modest. Look
for two-way action into this bottom. A short-covering rally is increasingly
likely now. Late sellers likely in or hurting.

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

NONE

EUR USD Daily

Resistance 3: 1.3420

Resistance 2: 1.3380

Resistance 1: 1.3320/30

Latest New York: 1.3206

Support 1: 1.3030

Support 2: 1.2950

Support 3: 1.2880

Comments

Rate follows GBP higher; scores highs overnight Europe but fails into early
New York. Recovers late in the day suggesting short-term players on the
short side covering back. Rally less volatile and the rate holds tech
resistance at 1.3325/30 area overnight. Rally all day today suggests a
short-squeeze is in the works; fall back argues the squeeze is over. Stops
around 1.3030 area likely under the market. More likely in-range but
probably cleared on the pullback from highs. Bulls are attempting to find a
bottom. 50 bar MA failed now likely to offer resistance and a close above
suggests the bottom will be in. Semi-official and sovereign bids and offers
seen last week. Technical levels around the 1.3300 area now likely to offer
resistance so expect two-way action and consolidation. Aggressive traders
can look to buy the next dip.

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

2:00am EUR GfK German Consumer Climate

All Day EUR German Prelim CPI m/m

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

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