Read the Daily Analysis

Today’s US Dollar Trading

• USD goes one way, biggest daily loss in years
• Stops and active selling seen
• Volumes better later in the day


Overnight Preview

• Look for follow-on selling
• Likely a quieter night as many are sidelined


Looking Ahead to Tuesday
All times EASTERN (-4 GMT)
• 10:00am USD Fed Chairman Bernanke Testifies
• 10:00am USD HPI m/m
• 10:00am USD Richmond Manufacturing Index

Summary
The USD bulls got their horns sawed off today as the Greenback is set to have its worst one-day loss since 2001; traders note that ongoing uncertainty with the US bailout of the banking sector, weaker equities in response to the crisis and soaring Crude Oil prices combined to give the USD a knock-out punch today. Falling to the worst levels on the day near the close traders hold little hope for anything more than a “dead cat bounce” over the next few days and many USD bulls have moved to the sidelines as support after support numbers got trashed. GBP rallied three big figures off the Asian lows scoring a high print at 1.8593; tracking EURO higher. Trader’s note that stops were triggered at each new high and active bids reported from official sources suggesting that the rate has a change in the underlying psychology; aggressive traders can buy shallow dips with confidence I think. EURO rallied as well knocking off a whopping four big figures from the lows for a high print at 1.4819 in late New York; traders note the same buyers all day and liquidity was good after the London fix. Aggressive traders can buy shallow dips but both EURO and GBP are looking very toppy and after a move like today a retracement with high volatility is due. USD/JPY broke back through the 200 day MA to find good size stops on the break back under the 106.00 handle; new lows accelerated for a low print late New York at 105.29 finding stops under the 105.50 area in size traders say. The rate had patchy volume early but once equities dropped late in the day active sellers emerged in addition to resting orders. Swissy has dropped through support as well for a low print at 1.0735; Loonie found big stops under the 1.0420/30 area for a low print at 1.0313 as active selling overwhelmed the fragile bulls. In my view, today’s action suggests that the underlying USD weakness has reasserted itself for the larger fundamental issues facing the US economy. Although a retracement is expected and likely will be larger due to the range today, it is unlikely that the USD bulls have the muscle to attempt to take control of the currency. Look for follow-on selling overnight and whipsaw after today’s one-way action. Technical traders will likely stand aside as well making for lighter trade unless the panic that hit equities starts to hit the Greenback.


GBP/USD Daily

Resistance 3: 1.8680
Resistance 2: 1.8620/30
Resistance 1: 1.8590/1.8600
Latest New York: 1.8612
Support 1: 1.8250/60
Support 2: 1.8200/10
Support 3: 1.8180


Comments
Rate rallies all day, resistance is cleared the other side of the 1.8500 handle so expect a pullback to be bought hard. Aggressive traders can buy the next dip. Equities pullback vote of “no confidence” so far on the bailout. Possible sovereign interest on the rally as semi-officials seen on dips in both EURO and GBP this morning; some stops triggered along with active buying. In my view, the GBP has weathered the storm fairly well and it suggests no serious down move near-term. Traders note stops mixed with offers above the market also. Major support has held for two weeks now, any weakness likely to be bought hard. Profit-taking bids continue as well. Close above the 1.8500 area for the week likely argues for another leg higher to end the month.

Data due Tuesday: All times EASTERN (-4 GMT)
4:30am GBP BBA Mortgage Approvals


EURO/USD Daily

Resistance 3: 1.4920/30
Resistance 2: 1.4880
Resistance 1: 1.4850
Latest New York: 1.4833
Support 1: 1.4420/30
Support 2: 1.4380
Support 3: 1.4320/30


Comments
Rate launches off the lows and never looks back; follows GBP higher but lots of stops and active buying seen. Makes a new weekly high; resistance is cleared so any dip is a buy opportunity. Likely support will hold at the 1.4330 area. Some upside drawn from Cable no doubt. Expect more two-way action with upside bias; traders note the rate is firm on dips so far despite the uncertainty in the market. Volumes better during the day than in Asia overnight. Traders report offers in size being absorbed. Traders suggesting that the rate is trading technically but today’s rally likely forced techies to the sidelines. Close over the 1.47000 area to end this week will make a lot of shorts nervous next week possibly extending a short-covering rally. Expect a solid higher close for the week. If long, look to add to positions on any weakness. Likely a dip back to the 1.4300 handle will offer a solid buy opportunity.

Data due Tuesday: All times EASTERN (-4 GMT)
3:30am EUR German Flash Manufacturing PMI
3:30am EUR German Flash Services PMI
4:00am EUR Flash Manufacturing PMI
4:00am EUR Flash Services PMI
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 Provided by: Forexpros.com - Written by Jason Van Jankovsky

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