Afternoon US Dollar Wrap-Up

The Greenback is firmer today after starting out on the defense overnight. Initially firm in Asia, the USD held up on follow-through strength into the start of New York trade this morning and prior to the release of the new home sales data USD strength was across the board and into some key technical S/R numbers. Traders note that the move higher in the USD was well-coordinated across the major pairs but volumes were not high at all suggesting that the strength might be short lived; which it was.

New Home Sales came below expectations at 848K and traders responded by selling off the USD quickly but losses were short lived; the USD recovering quickly into the London Fix and then basically holding there all day as volumes dropped considerably. GBP fell into support at the 1.9560 area just ahead of the news and then went bid quickly into the end of London trade eventually making new highs for the day ahead of the close; high print at 1.9725 before dropping back to close below the 1.9700 area; traders say the rate will likely have a tough time holding gains from a technical perspective but long-term players are continuing to watch for sins of an upcoming BOE rate hike.

EURO dropped into support as well before rallying, making a new high on the day and following GBP’s lead for higher pricing. EURO recovered the 1.3300 handle for a solid close but trader’s complained of the lack of volume on the move.

Attention appears to be focused elsewhere near-term as traders note the main interest remains on the Yen crosses. USD/JPY dropped off sharply on the news as the highs around the 118.44 area gave way to selling pressure. The rate broke back into the 117.60 area but bids at the rising support line held and the rate recovered back to hold the 118.00 handle. Great volatility in the USD these past few days so expect continued two-way trade and technical trade. Look for the USD to remain bid into Wednesday on reversal potential; expect stops to be triggered both ways as traders attempt to capture volatility near-term.

EURO/USD Daily

Pair correcting but lack of downside follow-through is suspect, volatility likely to remain higher so expect solid two-way action the next 24-48 hours. Near-term top appears in and lower volume rally today may be a selling opportunity. OK to cover existing shorts and re-set on volatility.

USD/JPY Daily

“Doji” star with a wide range indicates point of indecision, lower volume also a confirming indicator that volatility and whipsaw may be the case near-term. Better a weak close than a Doji in my opinion; two-way trade will be confusing I think. Look for an inside range day tomorrow and possibly Wednesday against US data due out.

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Jason Jankovsky

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