The USD reversed again after the London fix today as the majors made highs and then retreated as the end of the New York session drew closer; Cable and EURO both retreated over a big figure after posting highs near technical resistance. High prints in GBP at 1.5284 came around the London fix as a very large buy order hit the market into the fix; traders note that thin conditions likely exacerbated the move and the highs were sold by short-term accounts as well.

The rate fell back to the low 1.5100 handle and looks ready to close under the 1.5100 area as well; traders note a long selling wick on the daily chart suggesting that the technical objective for the short-term longs was reached as the rate scored 1.5250 area. EURO advanced as well making highs at 1.3748 tracking GBP higher but traders note that the major push was likely from EURO-Sterling cross traders again. Conditions remained thinner on the move and a large selling wick likely means the rally was a dead cat bounce into the end of the week. Although the rally was welcome in both EURO and GBP the failure to hold gains into the close today suggests more two-way action is coming and likely the USD will cover the same ground again; aggressive traders need to consider getting flat both pairs if long and possibly buying the next dip.

USD/JPY had the pressure on all day as equities melted down in New York; dropping through support at 92.50 for a low print at 92.42 before bouncing early in the session the rate failed to show any strength and faded back from the 93.00 handle late. Today's ADP employment data was unfriendly to the equities markets and likely helped to pressure the pair as well. USD/CHF gave a wild ride to traders today initially dropping to fresh lows for the session at 1.0868 and then rallying back to hold above the 1.1000 handle for parts of the day; high prints overnight at 1.1208 went unchallenged so far in New York. USD/CAD rallied as the USD found buyers for a high print at 1.2004 making a case for a short-covering rally in the pair. With a test of the 1.1750 area finding no major stops the rotation higher was to be expected. In my view, today's action was just another day of volatility and thin conditions making a stop-driven mess of balance sheets across the board. With the USD set to rally again overnight as the two-way whipsaw continues I would be very cautious about holding USD shorts overnight. Look to sell a rally back to resistance as the majors are willing to cover a lot of ground during this consolidation. 

Today's US Dollar Trading

• USD reverses to go two-way after London fix
• US data considered unfriendly to equities and USD
• Traders note stops above the market

Overnight Preview

• Look for the USD to hold gains
• Two-way action likely overnight as well

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

• 8:30am USD Unemployment Claims
• 10:30am USD Natural Gas Storage
• Tentative USD President-Elect Obama Speaks
• 3:00pm USD Consumer Credit m/m

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