Forextrader

Today’s US Dollar Trading

• USD starts firm in Asia, get’s hammered in New York
• Closes on record lows against EURO
• PPI at 27 year high

Overnight Preview

• Look for a round of profit taking by the USD bears ASAP
• Move was very sudden and unexpected

Looking Ahead

• 7:30 AM CST Wednesday Durable Goods forecast -3.5%
• 9:00 AM CST Wednesday New Home Sales forecast 600K

Summary
After a firm start in Asia the USD came under some selling pressure overnight Europe as German and UK data was mildly supportive for those respective currencies. Stops initially drove early New York trade but once PPI was released the USD started into a decline that eventually became a freefall. PPI out at +1.0% front number and +0.4% core was way over expectations; y/y PPI running at a 7.4% rate the highest since Oct. 1981. Initially thought to be supportive for the Greenback as traders speculated that the Fed has less room to lower rates but as the day wore on stops above the markets in the majors proved to be the USD’s undoing. Stops were elected across the board suggesting that active selling in recent days is being squeezed out. Large sellers were no match for the rally and the USD broke through several layers of support making a mess of the charts and balance sheets. Cable saw the 1.9780 area give way with more stops layered above the 1.9800 handle for a high print at 1.9876 with waves of active buying. Traders note that the rate has tested the monthly opening range and expect a lot of follow-on buying overnight but I doubt the rate has more in it so early. EURO rallied into stops above the 1.4860/80 area with more at 1.4900 and 1.4920; shorts eventually throwing in the towel for a late New York print at 1.4984 a new lifetime high. If you would have told me that we would have seen lifetime highs in EURO after PPI came out strong I would have said impossible but there it is. Forex Traders are expecting more follow-on buying but like in Cable, I don’t think it will be there so soon. Record high closes attract profit-taking by longs so I would say that any follow-on buying would be late. USD/JPY remained coiling again and traders are beginning to think the rate will never leave the comfort of the 107.00 handle. Low prints late in New York at the strong support area of 107.10/20; highs overnight at 108.16. Stops on either side of the market still remain in play and with such a large move by the USD elsewhere is appears the USD/JPY will breakout for the stops under the market first. Look for the USD to consolidate overnight. US data tomorrow likely to be overshadowed by technical trade unless wildly USD supportive.

EURO/USD Daily
R3: ?
R2: ?
R1: 1.5000
Current Price: 1.4975
S1: 1.4920
S2: 1.4860/70
S3: 1.4820

You have got to be kidding but there it is: lifetime highs and a close over the previous high print. Volumes larger traders say suggesting the rate saw active buying as well as rampant short-covering. Stops completely cleared leaving order books thin; very small chance of follow-on buying but I would look for the longs to liquidate first; I think late longs will look for a dip to buy. Fallback into previous resistance may mean a head-fake in the works but the jury is still out. 1.5000 is psychological resistance but after that; ?

GBP/USD Daily

R3: 1.9940/50
R2: 1.9900/10
R1: 1.9880
Current Price: 1.9862
S1: 1.9800
S2: 1.9750/60
S3: 1.9700

Sell signal from yesterday completely negated and rate closes near monthly opening range. Sellers likely to try again on strength over the 1.9900 handle as that is previous resistance prior to the big break. If range is forming a sell over the 1.9900 area is your best bet near-term; stops likely above the 1.9950 area and again at 2.000. Longs must be getting nervous around current area so expect a pullback but that pullback will be bought. Close under the 1.9700 handle needed to negate this rally.

Analysis by: Jason Alan Jankovsky in Association with The Forex Edge
Publisher: ForexPros.com