Today’s US Dollar Trading

• USD whipsaws around fundamentals, vote of no confidence

• Majors extend ranges in violent trade

• Volumes remain thin but volatility is huge

Overnight Preview

• Look for more two-way action, USD likely to whipsaw

• Majors likely to test S/R in Asia

Looking Ahead to Wednesday

All times Eastern (-5 GMT)

• 8:30am USD Trade Balance

• 9:50am USD FOMC Member Duke Speaks

• 10:00am USD Treasury Sec Geithner Speaks

• 10:30am USD Crude Oil Inventories

• 1:30pm USD FOMC Member Evans Speaks

• 2:00pm USD Federal Budget Balance


Extreme volatility and more two-way action was the rule today as the major pairs whipsawed between highs and lows several times creating havoc for traders across the board. Weaker equities pricing in response to Tres. Sec. Geithner’s plan to bail-out the banking sector suggests that USD bulls are not convinced that the plan will work. Geithner’s plan was long on rhetoric and short on concrete plans suggesting that more rhetoric will be needed before the trading community swallows the plan; apparently the government believes the more it talks the more work gets done. Big movers today were the USD/CHF and the GBP; Swissy rallied to a high overnight at 1.1783 before breaking lower and making a low print after the London fix at 1.1503; traders note stops under the 1.1470 area in size helped to break the rate lower. GBP fell off its highs from around the 1.4880 area and gradually sold-off until liquidating stops around the 1.4750 area fired off; the rate fell to a low print at 1.4456 making a range of five handles on the day. Trader’s note that in all pairs the volumes were thin but that didn’t stop technical trade at all. Dropping to low prints in New York USD/JPY fell to 90.12 testing the technical breakout seen during the short-covering rally last week; lack of follow-through higher likely encouraged a round of selling and a close under the 90.50 area likely to encourage more outright selling in my view. Traders note that stops were in –range and more likely under the 90.00 handle. USD/CAD rallied to a high print at 1.2495 after dropping like a brick to the 1.2147 area; first stops one way and then the other kept trades on their toes through the session. Additionally, the rate was attracting technical buyers on a potential close back above the 50 day MA; likely more bids to be seen but the USD is very two-sided and the rally is potentially a bull trap. EURO had a repeat performance from yesterday; high prints at 1.3076 above the 1.3030 area but then fell back hard to push under the 1.2880 area for a low print at 1.2808. Traders note the rate was taking cues from GBP and cross-spreaders and likely more losses are on the way with a second close under the 1.3030 area. IN my view, today’s volatility and whipsaw underscore how nervous the markets are. Today’s news from the US and the vote of no confidence seen in the first view minutes suggest more volatility is brewing. Look for continued two-way action, big ranges and more whipsaw.

Forex Analysis written by Jason Alan Jankovsky, featured by