Today’s US Dollar Trading

• USD starts weak and reverses

• FOMC announcement initially seen as positive

• Stops seen driving trade

Overnight Preview

• Look for USD to hold gains and consolidate

• Volumes should be lighter

Looking Ahead to Thursday

All times EASTERN (-5 GMT)

• 8:30am USD Core Durable Goods Orders m/m

• 8:30am USD Unemployment Claims

• 8:30am USD Durable Goods Orders m/m

• 10:00am USD New Home Sales

• 10:30am USD Natural Gas Storage

• Day 2 ALL WEF Annual Meetings


After dropping dramatically overnight and into early New York the USD has reversed to hold gains across the board against the majors. Most traders note that volumes dropped off significantly ahead of the FOMC rate announcement suggesting that most were sidelined ahead of the statement. Analysts are divided as to the exact meaning of the statement; some suggest that the Fed stands ready to do whatever it takes to resolve the economic crisis while others say the Fed appears a bit panicky in view of interest rates at near-zero unable to add positive stimulus so far. In my view, the issue still remains short-sighted at best and long-term solutions will be hard to enact with a financial community wanting a quick fix. As such, any Fed action will likely be short-lived and deepen the potential for recession; however at first blush the equities markets like the FOMC announcement and the USD is responding higher. GBP high prints at 1.4378 attracted sellers today with the rate dropping back to trade at the 1.4200 handle and looking like a reversal to test recent lows is in play. Traders note that LHS interest at the fix was largely ignored in thin conditions but sellers are currently active. EURO fared no better with high prints at 1.3329 ahead of FOMC; reversing hard to trade the 1.3100 area after the announcement. LHS interest was also reported in EURO suggesting that everybody kept their powder dry until the afternoon. Low prints at 1.3103 are still ahead of deeper support suggesting follow-on selling is due in Asia tonight. USD/JPY found close-in stops as expected above the 90.10 area for a high print at 90.76 before dropping back; traders note that technical resistance at 90.80 area appears to have held the advance suggesting that the stop-driven rally will need some active buying soon to extend into stops rumored to be at or near the 91.00 handle. Traders note that a short-squeeze is overdue and argue that today was an upside breakout from near-term resistance at the 90.00 handle. USD/CHF found stops above the previous support level at 1.1480 and continued to advance after the FOMC action; high prints at 1.1568 with lows still from overnight at 1.1329 suggesting the rate will try for resistance at the 1.1650 area again. USD/CAD found stops under the 1.2150/60 area early in the day for a low print at 1.2023 before rallying after FOMC; New York highs back over the 1.2200 handle are back above the previous support area suggesting that if the rate holds above the 1.2180 area into the close a rally may be in the works. Look for the USD to consolidate gains with an upward bias; more data due this week likely will be USD-negative so expect whipsaw and sell rallies.

Forex Analysis written by Jason Alan Jankovsky, featured by