The USD continued its climb against the majors today reaching the best levels of the day late against most pairs after suffering a setback earlier today. Weaker equities offered a bit of pressure as USD/JPY fell back through the 90.00 area late to make lows at 89.73; volumes remain light and traders note that the rate is due for a short-covering rally suggesting that a low-volume dip today may be the lows for the week. High prints overnight at 90.99 went unchallenged in New York trade. EURO held up better than the GBP today making highs overnight in Asia at 1.3104 and lows late in New York at 1.2855; traders note that technical support is strong at 1.2850 area and expect a bounce from this area to gain momentum on a rise over 1.3020/30 area of previous support.
Traders also note solid two-way flows and aggressive bids from quality names on the move into the low 1.2900 area during the day. In my view, aggressive traders can buy EURO anytime under the 1.2900 handle. GBP briefly rallied to print a New York high at 1.4040 area before dropping back on high volatility to the 1.3900 area; traders note that conditions were thin all day and may have exaggerated price swings. Cross-spreaders dominated trade overnight but may have backed off on aggressive selling as the major GBP crosses came off their highs later in the day. USD/CHF had a technical failure today as the highs at 1.1521 failed to attract aggressive buying leaving the rate vulnerable to a sell off neat-term; high prints were on lower volume and the rate finished near the 1.1470 area just barely over the 50 day MA suggesting a point of potential reversal . USD/CAD rallied along with USD strength elsewhere no doubt helped by the 50 BP cut in interest rates by the BOC early this morning; high prints at 1.2700 even were offered aggressively after the rally dropping the rate back under the 1.2600 handle for a few hours into the London fix.
Technical buyers likely showed up to lift the rate back to the 1.2650 area as that was previous resistance now hoping to become support. In my view, the rate is due for a sell off and the failure at 1.2700 is important because it suggests the rate cut was factored in. In my view, today's USD action was likely euphoria over the new president and the hope of a better tomorrow. If you look historically the USD has rallied in the first few months of a new presidents' term but has fallen after the "honeymoon" was over. President Obama has an impossible situation to solve by government action and has little or no plan to create a solution; once reality settles in the USD will suffer a downturn because it doesn't take a rocket scientist to see that a depression is in the works and the only solution is to weaken the Greenback moving forward. Look for the USD to consolidate overnight and fail at the highs the next 48 hours.
Today's US Dollar Trading
-USD holds gains amid whipsaw
-GBP holds above 1.3900 into the close
-Equities drop, volumes light
Overnight Preview
Look for consolidation
-USD to hold at highs the next 24-48 hours
Looking Ahead to Wednesday
All times EASTERN (-5 GMT)
-10:00am USD Treasury Sec Nominee Geithner Speaks
-1:00pm USD NAHB Housing Market Index
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