Today€™s US Dollar Trading

€¢ Early USD strength fades after London fix

€¢ Stops noted driving trade from smaller accounts

€¢ Two-way action and technical trade dominate, more likely

Overnight Preview

€¢ Look for continued two-way action

€¢ Majors likely to grind sideways-to-higher overnight

Looking Ahead to Tuesday

All times Eastern (-4 GMT)

€¢ 6:00am USD FOMC Member Evans Speaks

€¢ 10:00am USD Fed Chairman Bernanke Testifies

€¢ 10:00am USD HPI m/m

€¢ 10:00am USD Richmond Manufacturing Index

Summary

After a brief foray into positive territory the USD is back under threat heading toward the low end of the recent ranges in late New York. Traders note that today€™s action has been mostly stop driven by small accounts attempting to run with momentum but getting caught both ways. Aggressive buyers of USD from the overnight session were rewarded by new lows in the majors into the London fix but large accounts were using the dip to add to working longs and the majors reversed back toward the mid-to-high end of their ranges today; USD/CAD making lows in the process. Traders report some RHS interest into the fix for GBP and EURO helping to underpin across the board with only USD/JPY holding good gains but off the highs late. Traders also note that a US investment back a good seller of USD/JPY into the high prints around 97.36 and working the sell side through the close. USD/JPY ends around the 96.80 area after a brief dip to 96.50 area in stop driven trade obviously from longs set ahead of the fix. Traders expect the rate to remain two-way but the failure to hold the 97.00 handle will likely work against the bulls through tomorrow. GBP fell to tech support at 1.4449 low print only to recover quickly a full handle; the rate is firm into the 1.4550 area with the 100 day MA under threat on a closing basis near-term. Traders note that solid bids were seen on the break suggesting large names buying GBP. EURO fell to a low print at 1.3484 but spent no time on the 1.3400 handle recovering back to the 1.3630 area in late trade. Stops were noted on the break of 1.3510/20 area but volumes were light into the lows; traders note large names seen on the bid under 1.3500 suggesting the rate is due for further upside. Several shops note that the rate €œfeels€ like it wants to try for the 1.3800 handle and with a strong close back on the 1.3600 handle the door is open for further short-squeeze. USD/CHF rallied along with USD strength elsewhere initially but failed at a high print of 1.1344 before dropping back a full handle; ending the day around 1.1240 area putting the 200 day MA back into focus. Traders warn a close below the 1.1195 area could put the recent rally on hold no matter what the SNB decides to do as a shift in sentiment is likely at that point and no central bank can fight sentiment. USD/CAD is making lows at this writing at 1.2265 putting the real potential for a close under the 100 day MA in play; traders note that the rate €œfeels€ heavy after the fix and with interest in the emerging market currencies today money might move out of USD/CAD and into Aussie, Kiwi and others to take advantage of further strength seen there. In my view, the USD€™s failure to extend early strength shows that the underlying strength of the Greenback in recent weeks is failing; aggressive traders can add to open USD shorts within 24 hours in my view. Look for the Majors to remain two-way but mostly higher overnight.

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