The USD suffered massive whipsaw today as stops on the upside got triggered forcing the majors into key support early only to rebound putting the USD mixed on the day holding gains only against the Swissy into the end of New York trade. Earlier reports of solid two-way action into the lows for GBP resulted in new monthly low at 1.3619 only to see a three big-figure rebound making for a near-hook reversal into the end of day as shorts got beaten back hard amid modest flows. Highs in Asia at 1.4025 remain unchallenged as of this writing but with a solid close for equities in positive territory follow-on buying can't be ruled out.

Traders note that most of the action was right around the London fix leaving the late shorts holding the bag. EURO also had a volatile day as selling found stops under the previous lows around 1.2850 area triggered for a low print at 1.2824 only to rally along with cable late in the day to rebound over the 1.2900 handle to close in the 1.2950 area; traders note that EURO has held the 75% retracement of the recent run-up to the Dec highs suggesting that a potential short-squeeze may be in the works there as well. After the New York option cut the USD/JPY fell victim to hard selling with traders noting a huge interest from platform traders to sell on a break of the previous weekly lows around the 88.40 area dropping the rate a full big figure into resting stops under 87.50 for a low print at 87.09; a marginal new multi-year low before bids showed up.

USD/JPY rallied all day topping the 89.00 handle to end New York around 89.30 area amid modest flows. Technicians remind that the rate has a huge buying wick and likely will follow-on higher into early Asia overnight if equities remain firm. USD/CHF rallied into a high print of 1.1617 before reversing; due largely to reports from the SNB that they will intervene to prevent the CHF from rising further; the Swissy is the only pair to post solid gains on the day and may be up against tech resistance suggesting a drop later is coming. USD/CAD rallied as well to a high print at 1.2769 before dropping back to trade a two full handles lower around the 1.2580 area late in New York. Traders note that volumes were thin into the highs and may have been a bull trap. In my view, the USD is over-bought and with the large swings in price today it looks like a top may be in for the week. Expect more two-way action to consolidate losses with high volatility likely but aggressive traders can stand pat if holding USD shorts into this high.

Today's US Dollar Trading

• USD rallies early; reverses hard after the London fix
• Traders note solid two-way flows and good bids in GBP
• Volumes a bit better suggesting late shorts active

Overnight Preview

• Look for the USD to consolidate losses
• Majors likely to follow-on higher to end the week

Looking Ahead to Thursday
All times EASTERN (-5 GMT)

• 8:30am USD Building Permits
• 8:30am USD Unemployment Claims
• 8:30am USD Housing Starts
• 10:00am USD HPI m/m
• 11:00am USD Crude Oil Inventories

Forex Analysis by Jason Alan Jankovsky at ForexPros.com. For more details about Forex Trading and Tips for decent earnings through Forex Trading, Please check http://www.forexpros.com