The USD continues to weaken in Wednesday’s trade; starting softer in Asia in line with weaker equities pricing. Most of the Asian stock markets were lower overnight in sympathy with the losses seen in the DJIA Tuesday traders say; higher oil prices also dragging on the USD and lifting EURO. Overnight news was light but significant; the BOE MPC minutes showed an 8-1 split to leave rates unchanged with Blanchflower again voting for a 25 BP cut.

Traders see the MPC holding rates firm in response to potential inflation pressures and the GBP firmed although still under the highs seen Tuesday; high prints at 1.9699 before selling was seen. Traders say the rate feels “heavy” this morning to start New York and cross spreaders are active in EURO-Sterling. EURO is higher in response to better-than-expected IFO data; high prints at 1.5775 saw profit-taking selling and stops mixed together.

Initially weaker in Asia ahead of the news traders note that EURO has closed above important technical resistance in Asia making for a potential extended rally to develop. In my view the EURO has a retracement due before continuing to advance. With Oil prices topping $130 this morning it is hard to argue for a lower priced EURO for very long. USD/JPY is weaker but with two way action more evident.

Traders note light stops above the 104.00 area are untouched overnight with high prints at 103.70 capped by exporter selling. Stops under the early lows at 103.40 area were finally found and the rate pressed for low prints at 103.04 before a bounce was seen. Analysts remind that technical support is under the 102.50 area leaving a lot of room for downside stops but I think the rate is due for a bounce. Look to add to open shorts on that bounce.

Swissy and Loonie are now at technical downside objectives; aggressive traders can look for a long around current prices or slightly lower for Loonie. An upside correction for Swissy is due in my opinion and the strength of that correction will determine where to short. Aggressive traders can go long around the 1.0310 area

Overnight Asia/Europe 

•USD weakens further
•IFO better-than-expected
•MPC votes 8-1 to keep rates unchanged

Today’s Economic Reports
All times EASTERN (-5 GMT)

•10:30am Crude Oil Inventories 0.2M
•1:00pm Fed Governor Warsh Speaks
•2:00pm FOMC Meeting Minutes

Looking Ahead
All times EASTERN (-5 GMT)

•8:30am USD Unemployment Claims 373K
•9:00am USD Fed Governor Kroszner Speaks
•10:00am USD House Price Index m/m