Overnight Asia/Europe

• USD firms as Russians support Ruble

• GBP under pressure to new lows

• Volumes remain thin ahead of inauguration

Today’s Economic Reports

All times EASTERN (-5 GMT)


Looking Ahead to Wednesday

All times EASTERN (-5 GMT)

• 10:00am USD Treasury Sec Nominee Geithner Speaks

• 1:00pm USD NAHB Housing Market Index

After a three-day weekend that saw the USD advance against the majors on Monday, the Greenback is extending its rally against most major pairs again this morning; the big mover overnight is the GBP as the rate falls to a new multi-year low. Traders report thin conditions but lot’s of two-way action as Cable falls through the 1.4100 handle for a low print at 1.3912 in early New York. Starting overnight as GBP crosses remained under pressure the drop in Cable was pressured by Russian sales of GBP and EURO as the Russians attempt to support their currency. Traders estimate around 10B the last 24 hours was spent by the Russians most of it in GBP but some in EURO and USD. Combined with EURO-Sterling sales and GBP/JPY sales the GBP fell to its lowest level since July 2001 making a mess of balance sheets as longs scrambled to get out and shorts pressed their advantage. Analysts project a test of the 1.3600 area if Cable cannot hold 1.3850 on further weakness. EURO also fell on sympathy pressure but traders also report solid two-way interest with large names on the bid as the rate fell through 1.3020 area with rumors of semi-official names on the offer. Despite large drops in both pairs buying interest was evident suggesting that buyers are still interested in dips; high prints in EURO at 1.3104 overnight with lows in early New York at 1.2920. Some stops seen as technical levels fell but the main interest was rebalancing suggesting active selling in both EURO and GBP despite the net cross-selling in the non-USD pairs. USD/JPY was on the quiet side overnight holding the 90.00 handle as interest was in the European pairs took center stage; trader note interest on the dips for a low print at 90.07 with highs at 90.99 after the recent try to hold 91.00 handle. The rate now looks poised for a short-squeeze and sell interest is rumored to be waiting at the 92.00 area and above. Traders note volumes remained lower as the markets appear to be watching the US Presidential Inauguration for clues to the USD’s next move. USD/CHF is holding firm at the 1.1400 handle erasing offers around the 1.1380 area the past 24 hours; low prints at 1.1315 with highs at 1.1482. Traders note solid offers above the 1.1450 area suggesting that the USD may be overextended a bit. USD/CAD rallied as well for a high print at 1.2661 in early New York; lows at 1.2528 were above the 1.2480 area suggesting late longs may be making for a high around the 1.2700 area or above but volumes are thin. In my view, the USD is benefiting from aggressive overseas intervention more so than economic reality. Today’s euphoria over the new US President will probably encourage a lot of USD firmness as the honeymoon period attracts USD buyers but the reality of the situation is far worse than current pricing suggests. The only way out of this situation is to devalue the USD and I think that makes for some attractive buys across the board. Look for the USD to remain two-way and consolidate the next few days.

Forex Analysis written by Jason Alan Jankovsky, featured by forexpros.com