Today’s US Dollar Trading

• USD fails to hold gains

• Stops run early

• Two-way action suggests offers building

Overnight Preview

• Look for consolidation with a downside bias

• USD likely to open lower in New York tomorrow

Looking Ahead to Thursday

All times EASTERN (-5 GMT)

• 8:30am USD Core Retail Sales m/m 0.7%

• 8:30am USD Retail Sales m/m 0.5%

• 8:30am USD Import Price Index m/m 2.5%

• 8:30am USD Unemployment Claims 370K

• 10:00am USD Business Inventories m/m 0.3%

• 10:35am USD Natural Gas Storage

• 11:30am USD Fed Chairman Bernanke Speaks


The USD was unable to hold gains earned yesterday as the Majors rallied across the board leaving the USD bulls with losses today. Although the rally by the GBP was muted compared to the rally seen in EURO traders remind that the week is not over yet and that the US data due the next 48 hours could easily be seen as unfriendly to the Greenback. GBP was unable to test highs made in Europe overnight as spillover strength from EURO supported the rate despite offers layered above the 1.9620 area. High prints at 1.9670 were offered by cross-spreaders and the rate held the 1.9620 area into the close. EURO made a new high in New York at 1.5588 before offers capped the move but the rate continued to firm all day and managed a close at the 1.5565 area suggesting that the EURO has some teeth to the bounce near-term. Volatility has been large in both pairs and traders expect that to continue. Both pairs may cover a lot of the same ground twice the next few days but at least in EUR I expect a firm close back over the 1.5600 handle to close the week. The ECB is set to hike rates and will continue to do so for the next few quarters and I don’t see the EURO falling back any more than a reasonable correction—which may have already happened with the trade action seen since February this year. USD/JPY is lower and failed to hold the 107.00 handle on the day; low prints at 106.55 were bought as rumors of official demand were seen but the rate closes lower on the day and more losses are coming in my view. Swissy is also under pressure and low prints in New York at 1.0307 are decidedly below stops seen at the 1.0350 area earlier in the day. Trader’s note that in all pairs light stops were elected as the USD lost ground but the larger stops are still working; look for more USD pressure near-term as technical trading dominates ahead of US data tomorrow and Friday. Look for book-squaring tonight ahead of Retail Sales data; not normally a market-mover but with unemployment on the hook tomorrow there is a chance of aggressive action by the USD bears if they like the data.

Analysis by: written by Jason Alan Jankovsky


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