Overnight Asia/Europe

€¢ USD firms overnight, stops drive a lot of trade

€¢ US rejects GM and Chrysler deal, equities fade

€¢ Traders continue to trade fear ahead of G-20

Today€™s Economic Reports

All times EASTERN (-5 GMT)

€¢ NONE

Looking Ahead to Tuesday

All times Eastern (-5 GMT)

€¢ 9:00am USD S&P/CS Composite-20 HPI y/y

€¢ 9:45am USD Chicago PMI

€¢ 10:00am USD CB Consumer Confidence

Summary

The USD firmed up overnight as follow-on selling found stops in the majors. Overnight news that Spain will offer its first bailout during the current financial crisis pushed EURO into stops under the 1.3200 area and below keeping the rate under pressure throughout the evening. Bids ahead of 1.3150 offered initial support but traders note more stops under the 1.3150 area are building. High prints in Asia at 1.3287 were offered by a US bank traders say. Adding weight are lower equities; markets reacting to news that the US government will not support the current plans by GM and Chrysler and may be looking for a bankruptcy. Traders note that investor confidence will likely take a hit on the news and expect further declines in equities during the day. GBP fell through stops layered under the 1.4200 handle with low prints at 1.4109; high prints at 1.4300 and the rate is holding 1.4150 area at the New York open. Traders note that UK mortgage approvals hit the highest levels since May of 2008 and are providing a bit of support from larger names. USD/JPY is lower as high prints at 98.33 went offer from exporters; low prints at 95.94 before finding bids. Traders note stops at 96.60/80 were in size suggesting the rate was heavily long from recent trade. USD/CHF continued to firm into the 100 day MA with high prints at 1.1517 just under the resistance level around 1.1520/30 area; low prints at 1.1439 in early Asia. USD/CAD rounds out the firmer USD this morning with high prints at 1.2539 and is holding firm around the 1.2490 area; low prints at 1.2382 above support around 1.2380 area. Attention now turns to the Thursday G-20 meeting this week and the ECB meeting. Traders are expecting a 25-50 BP cut from the ECB but do not expect any real help from the G-20; technical factors are likely to drive trade ahead of US data this week as well. Stops are noted below the current levels in the majors suggesting that the USD will remain bid into the end of the week. Aggressive traders can sell rallies in the USD but it is advisable to wait 24 hours to see how initial bulls react to the start of the week when the USD has firmed to start. In my view, the markets are still trading on news and potential flight-to-quality as the underlying fundamentals continue to favor a weaker USD. Regardless of how likely the Greenback is to weaken over time the market continues to price in fear enough that the USD is continuing to trade in a wide topping range. Look for the majors to remain under pressure today and into US data on Tuesday.

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