US Dollar holds near highs

10-Yr: -05/32..1.550%.. USD-JPY: 78.73.. EUR-USD: 1.2452

The US Dollar Index holds near session highs during what has become a relatively uneventful session. The Index has remained range bound between 82.70 and 82.90 for most of today's trade with Bulls currently testing the upper boundry.

EUR-USD is -55 pips at 1.2440 as action remains choppy ahead of Wednesday's European Central Bank interest rate decision.

Mario Draghi's press conference will be of interest, but traders will be looking to see what/if any action is taken by the central bank to help ease the burden on the region's struggling economies.

The 1.2350 area will be in focus ahead of the decision with a breakdown likely providing a test of the 1.2000 area.

Short interest in the EUR remains at record levels, so the possibility of a Short covering rally exists.

Eurozone data is limited to German Industrial Production. GBP-USD is -10 pips at 1.5370 as trade consolidates in the 1.5350/1.5400 area. Traders remain fixated on support in the 1.5250/1.5300 area with a breakdown likely resulting in a test of the May 2010 lows near 1.4400.

Britain's Construction PMI will be released tomorrow morning. USD-CHF is +35 pips at .9645 after holding near-term support near .9600 while EURCHF continues to trade near 1.2010.

USD-JPY is +40 pips at 78.75 as comments following the G-7 teleconference sparked worries of Yen intervention. A more likely explanation is bulls defended the pair near 78.00 support and nervous Shorts began to cover their positions.

Today's strength has the pair back above its 200-Day Moving Average for the 1st time in 4 days with resistance in the 79.00 area seeing some action. AUD-USD is +25 pips at .9740 after this morning's Reserve Bank of Australia interest rate cut appeared to be factored in.

Critical support near .9700 continues to hold, but Aussie bears will be looking for a breakdown that if occurs, may produce a move into the .8800 area. Australia's GDP reading crosses the wires tonight.

USD-CAD is -10 pips at 1.0385 after the Bank of Canada held its benchmark rate steady at 1.00%. Near-term support lies in near 1.0300 with stronger support coming into play near 1.0050.

Longer dated US Treasuries finish on the lows

10-Yr: -10/32..1.567%.. USD-JPY: 78.73.. EUR-USD: 1.2443

US Treasuries finished the day near session lows, the slightly better than expected ISM Services number led to a continuation of profit-taking.

Sellers were in control for a 2nd consecutive session despite pleas from Spanish Budget Minister Cristobal Montoro in which he indicated Spanish lenders are in need of outside assistance.

The long bond saw the heaviest selling as a drop of one point pushed it down to 107 27/32. Today's selling ran the 30-yr yield up close to 5 bps for a 2nd consecutive session as it now sits near 2.62%.

More modest selling in the belly of the curve produced a 2.9 bp rise in the 10-yr yield as the benchmark settled at 1.556%. Shorter dated maturities outperformed, with light buying dropping those yields close to 1 bp apiece.

The yield curve swung steeper as the 2-10-yr spread widened to 130.5 bps.

Data picks up on Wednesday as the weekly MBA Mortgage Index (7), productivity-rev., unit labor costs-rev. (8:30), and the Fed's Beige Book (14) are released.

Atlanta's Lockhart will be in Florida to talk the economy (8:15); Fed Gov. Tarullo will testify in Washington on Implementing Wall Street Reform: Enhancing Bank Supervision and Reducing Systemic Risk (10); SF's Williams will be in Seattle to give his economic outlook (15:30); and Fed Vice Chair Yellen speaks on The Economic Outlook and Monetary Policy (19).

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.