Today’s US Dollar Trading

• USD holds gains but flows light

• S/R holds as expected

• Speculation that the Fed will not move rates capping the USD

Overnight Preview

• Consolidation likely

• Two-way action with a downside bias

Looking Ahead to Tuesday

All times EASTERN (-5 GMT)

• 9:00am USD National HPI Composite-20

• 10:00am USD Consumer Confidence

• 10:00am USD House Price Index m/m

• 10:00am USD Richmond Fed Index


The USD is firmer but falling off the highs for the day as the volumes are drying up into the New York close. Traders note that across the board the USD remained inside established ranges to start the week and due to the two-way nature of today’s action most traders expect more consolidation. Volumes got really light after the London fix most desks say and it is likely that traders don’t want to force positions ahead of the two-day FOMC meeting which starts tomorrow. Analysts are almost unanimous that the Fed will not move rates on Wednesday but are divided as to the significance of the statement. Most are expecting Bernanke to talk tough but no one expects the Fed to do anything for the next two or three FOMC meetings. In response to poor European news overnight the EURO and GBP both fell back to near-term support but rallied off those lows after the London fix this morning and are now at their highs for the New York session into the close. EURO has regained the 1.5520 area after dropping into the 1.5460/70 area on light volume this morning. Traders expect EURO to remain two-way through the week with technical trading likely; most analysts say the rate is fairly pricing in a 25 BP hike by the ECB on Jul 3rd. In my view, the FOMC is the key to the trade this week as no move at all will work favorably for the EURO. USD/JPY continued to hold gains but was unable to attract any serious buying at the high prints of 108.07; stops rumored to be above the 108.10 area are out of range today. Traders expect the rate to weaken near-term as the technical picture favors at least a test of the 107.00 handle this week. In my view, the rate is due for a sharp sell-off as all these longs must be getting nervous now that the rate has failed at the quarterly highs several times. Look for the USD/JPY to rotate lower overnight and test the south end of the range the next 24 hours. Swissy is also failing at key resistance, the 1.0480 area. Offers from late longs appear to be active as no stops were reported above the 1.0410/20 area only active buying. Now that those longs are under threat expect a pullback into the 1.03 handle soon. Should be a quiet night ahead of US data tomorrow; don’t expect any surprises.

Analysis by: written by Jason Alan Jankovsky


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