Today€™s US Dollar Trading

€¢ USD volatility continues but majors hold gains

€¢ S/R tested and some pairs hold

€¢ Stops seen in USD/JPY and a weak close

Overnight Preview

€¢ Look for follow-on selling of USD overnight

€¢ USD is still forming a top

Looking Ahead to Thursday

All times Eastern (-4 GMT)

€¢ 8:30am USD Core Retail Sales m/m

€¢ 8:30am USD Retail Sales m/m

€¢ 8:30am USD Unemployment Claims

€¢ 10:00am USD Business Inventories m/m

€¢ 10:00am USD Treasury Sec Geithner Speaks

€¢ 10:30am USD Natural Gas Storage


Volatility was the rule again today but USD action was not as pronounced as yesterday€™s whipsaw and the USD ended mixed against the majors to finish New York today. Most of the majors ended after testing important S/R areas and finishing the other side suggesting that the USD is continuing to top around current levels. Ending near the highs after a pullback during the day was GBP and EURO. GBP rallied to hold the 1.3800 handle after scoring highs at 1.3841 suggesting that the low-volume dip to the 1.3550 area overnight was a bear-trap. Further upside is likely if the rate can score the 1.3900 handle mid-week as the rate is overdue for a short-squeeze in my view. EURO rallied to a high print at 1.2817 where offers ahead of 1.2820 area capped initially; the rate fell back on short-selling to the 1.2740 area but regained the 1.2800 handle late in the session and holds in the 1.2790 area at this writing. Both GBP and EURO held important support overnight and extended highs during the day suggesting that although weekly highs are still higher in both pairs stops are likely from late shorts at or near the weekly highs in both pairs. USD/JPY found stops under the 97.80 area as expected and more at the 97.50 area; low prints initially at 97.17 before rallying to the 97.70 area but then fell off again for low prints at 97.02 clearing more stops from longs set on the dip; traders note that macro accounts were selling on the break most likely covering longs set earlier above the 98.50 and 99.00 area. USD/CHF is holding off the 100 day MA around the 1.1550 area with low prints at 1.1538 making for an inside range day; traders note that non-USD pairs for CHF also under selling pressure today suggesting that CHF is due for a further rally. USD/CAD is the sole pair better on the day with late high prints at 1.2905 before backing off a bit to the 1.2880 area; lows at 1.2749 missed stops said to be resting under the 1.2750 area and traders expect a further decline in the USD will likely pressure the rate lower overnight. In my view, the USD is continuing to sketch-out a top in current ranges. With USD/JPY making a low-close for the month today there are solid signs that the sentiment near-term is shifting to a pullback of some type. With more posturing and little action from government officials combined with a short-covering rally developing in equities the USD will likely suffer more selling as late longs bail and wait for a drop before trying the long side again; I think the bull side will be tougher going to end the week so aggressive traders can sell USD on rallies.

Forex Analysis written by Jason Alan Jankovsky, featured by