Volatility was the rule of the day today; equities were both sides of unchanged as was oil. The Greenback ended mixed on the day as investor confidence remains wary of recent developments on the banking front.

The historic coordinated rate cut by the world’s major central banks has left traders with additional fundamentals to sort out and at this point most are confused as to what will be the result moving forward.

Traders note that “sharp” buyers were seen on both sides of the USD today suggesting that more volatility and two-way action will likely be the case. On the day the GBP fell as cross-spreaders bought Yen and EURO for Sterling forcing non-USD pairs lower. Cable slipped under the 1.7300 handle for low prints on the day at 1.7260 before profit-taking bids were seen lifting the rate back over the 1.7300 handle.

Traders note that volumes still remain softer and that may have exacerbated the move lower; the close today under the previous low from yesterday leaves the GBP vulnerable to more technical selling in my view. Aggressive traders can look for a buy point the next 24 hours as the market is heavily oversold in my view. EURO rallied for a new weekly high at 1.3755 before profit-taking by early longs dropped the rate back into the 1.3670 area but the rate is closing near the weekly opening range suggesting more upside is likely to end the week.

Traders note stops above the 1.3740 area suggesting that late shorts are attempting to sell rallies in the EURO. USD/JPY is sharply lower having dropped to a 98.58 low print over night before rallying back to trade above the 100.00 area; traders note stops at the 99.50 area on the way down twice today suggesting that in addition to profit-taking bids there is some interest in buying the sharp drop by intraday longs. USD/CHF is off the overnight highs by two full handles for a low print in late New York at 1.1210 before bouncing slightly to the 1.1250 area.

Traders note stops under the 1.1270 area in size suggesting late longs were buying from Monday’s rally. In my view, the volatility is whipsawing traders and risk appetite is still low. In the long run the USD will suffer more losses as the underlying weakness in the economy becomes center-stage after the credit crisis is mitigated. Near term risk on the USD is to the upside in my view and aggressive traders need to look at the sell-side of the Greenback moving forward; although ranges may be larger. Look for the USD to whipsaw overnight as two-way trade continues and volumes remain light until traders can digest what the recent fundamentals mean moving forward.

Today’s US Dollar Trading

•           Traders remain unsure what rate cut means
•           Volumes remain lighter
•           “Sharp” buyers seen on both sides

Overnight Preview

•           Look for more two-way action
•           USD likely to cover a lot of the same ground twice

Looking Ahead to Thursday

All times EASTERN (-4 GMT)

•           8:30am USD Unemployment Claims
•           10:00am USD Wholesale Inventories m/m
•           10:35am USD Natural Gas Storage
•           1:30pm USD FOMC Member Stern Speaks
All Day for everybody G7 Meeting.

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