The USD whipsawed both bulls and bears today after a surprise ADP report ignites a round of USD selling. Most of the major pairs rallied to test near-term resistance and the Greenback went on the defensive shortly after the news this morning after building a nice base of firmness overnight. Dropping through several support levels the USD found stops and active selling to drive it into previous weekly lows; traders note that volumes were not impressive and suggest that the break may be a bear trap ahead of US and ECB data tomorrow.

GBP failed to rally to new highs but tracked EURO higher after the news. Stops above the 1.9920/30 area triggered after shorts took control under the 1.9900 handle briefly this morning. Highs at 1.9977 went unchallenged despite the rally in EURO. Scoring new weekly highs and a new 30 day high at 1.5889 EURO remained bid all day after stops above the 1.5850 area were triggered.

Traders note that volumes were lighter but can’t argue with the near-term strength. Poor US data is expected tomorrow and a 25 BP rate hike by the ECB is keeping the rate bid. Many traders are sidelined ahead of tomorrow’s news due to the fact that the rate is at the levels it should be at for the hike and poor US news. In my view, the EURO is setting up for a correction lower and today’s strength is possibly a bull trap. Tomorrow will be hard to play as the markets close early in the US after a slew of important fundamentals.

USD/JPY looked strong this morning then broke back sharply as the USD was sold across the board; traders note that the rate is a full handle lower than the highs at the open. In my view the USD is having a knee-jerk reaction and USD/JPY is likely to recover into tomorrow’s action. Aggressive traders can look to buy the rate on weakness under the 105.80 area near-term.

Swissy and Loonie both broke back to go neutral on the day after scoring important 24 hour highs. In my view, the USD is whipsawing both sides and neither the bulls nor the bears have the upper hand. Expect more volatility on Thursday as the ECB meeting/press conference add fuel to the US data due out about the same time. With an early close it will be a volatile day so if not positioned with a lead it is OK to stay flat and come back next week.

Today’s US Dollar Trading

• The Greenback whipsaws, ends weaker
• EURO holds 1.5800 handle with conviction
• Volumes lighter

Overnight Preview

• Traders look for a quiet evening ahead of Thursday
• Expect volatility

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

• 8:30am USD Nonfarm Employment Change
• 8:30am USD Unemployment Rate
• 8:30am USD Average Hourly Earnings m/m
• 8:30am USD Unemployment Claims
• 10:00am USD ISM Non-Manufacturing Composite

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