Today’s US Dollar Trading

• US data neutral to bearish for USD

• USD holds gains despite two-way action

• Sovereign and semi-official bids seen in EURO

Overnight Preview

• Look for the USD to remain two-way overnight

• Should be quiet ahead of US data in the morning

Looking Ahead to Thursday

All times EASTERN (-5 GMT)

• 8:30am USD PPI m/m

• 8:30am USD Unemployment Claims

• 8:30am USD Core PPI m/m

• 8:30am USD Empire State Manufacturing Index

• 10:00am USD Philly Fed Manufacturing Index

• 10:30am USD Natural Gas Storage

The USD ended the day fairly subdued after most of the day’s action centered around this morning’s release of US retail sales data; coming in weaker the news was seen as neutral to bearish for the Greenback but the USD continued to hold its own against the majors through the day’s action. Most pairs fell into new lows on the day after erasing gains seen in Asia to start the day making the potential upside for the USD look better into the close but the facts are tomorrow’s US data cannot possibly be seen as supportive suggesting that the USD rally has run out of upside momentum. Also, the ECB is set to announce their rate policy tomorrow and analysts are expecting a 50 BP cut; most feel that is largely factored in. Analysts say they will be watching the statement more so than the actual rate cut looking for long-term clues to the ECB policy moving forward. Low probability for no cut in my view but that would be a big surprise to the markets. On the day, GBP remained under pressure testing overnight lows after the start of New York trade at 1.4490 but holding the 1.4500 handle most of the day; briefly rallying to the 1.4600 handle but failing to hold on short-covering. Traders note that cross-spreaders for Yen and EURO continued to be the main focus for most of the past 24 hours. EURO also fell in sympathy selling with GBP for a low print at 1.3092 bouncing all the way back to trade the 1.3200 handle briefly; the rate remains very two-way and leaves a large selling wick on the day suggesting selling pressure remains on rallies. Traders note that semi-official and sovereign bid interest was seen on the dips under 1.3200 suggesting a near-term bottom; aggressive traders can be buyers under the 1.3200 area in my view but be ready for whipsaw. USD/JPY traded into stops around the 88.80 area for a low print at 88.60 but rallied right back to hold the 89.00 handle into the close; traders note that shorts are getting nervous the more time the rate holds above the 89.00 area as stops are light underneath and the rate can’t find active sellers. In my view, the upside is due on a short-squeeze. USD/CHF failed to extend to the upside as well making a high print at 1.1243 and falling back to the 1.1160 area; some analysts were looking for a test of the range both ways but the rate was unable to extend losses under the 1.1150 area today leaving the potential for more two-way action the next few days. USD/CAD rallied and held gains all the way to a high print at 1.2495 erasing resistance for the most part. I would look for further strength to be sold but the upside numbers appear a distance away; possibly as high as the 1.2700 area. Tomorrow’s PPI and Philly Fed is likely to be USD negative; expect a sell-off in the Greenback before the week’s end.

Forex Analysis written by Jason Alan Jankovsky, featured by