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US Housing slump remains, as bets added to 50 bps cut by Federal Reserve

"The Japanese Yen (JPY) weakened during the European session. The USDJPY traded with a low of 106.00 and a high of 107.04 before closing the forex trading day at 106.85 in the New York session..."

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Spotlight on FOMC rate announcement.

"The Euro (EUR) remained well supported on Tuesday holding firm above key levels, suggesting the Euro had upside potential in light of the Fed rate announcement due Wednesday. Overall the EURUSD traded with a low of 1.4737 and a high of 1.4798 before closing the forex trading day at 1.4776..."

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EUR/USD

The EUR/USD took a break today, moving into a sideways pattern. A higher than expected U.S. Nonfarm Productivity of 1.8% over the forecasted 1.0% did little to damage the pair and could be an early sign of strength gathering for the EUR/USD. On the 30 minute chart below, notice that after inserting a Fibonacci retracement from the prior high of 1.4931 on February 1st to today’s recent low of 1.4591, there is resistance at the 23.6% level and support at the 0% retracement level. Prices at the time of this writing remain indecisively below or barely touching the 50 period simple MA on this 30 minute chart and well below it on a 1 hour chart. Tomorrow’s ECB announcement is rumored to announce unchanging rates and may very well influence a breakout out of this range.

GBP/USD

Like the EUR/USD, the cable stayed within a range after a sharp drop around 7AM. Prices remain well below the 50 period moving average and are idling between the 23.6% resistance and 0% support Fibonacci levels. The U.K.’s Industrial Production report and the lesser influential Manufacturing Production report are expected at 9:30 tomorrow morning and both have favorable forecasts. This could be just what the cable needs to makes its jump, if only momentarily, out of this recent range.

USD/JPY

The USD/JPY remains in a sideways trend as well but with volatility. On the 30minute chart, prices rose above the 50 period MA at around 2pm and then dropped back below by 5:30pm GMT. Fibonacci resistance occurs at the 38.2% line as prices whipsawed back and forth around the 23.6% line and at the time of this writing, have show below the 50 MA and threaten to near the 0% Fib line.

USD/CHF

After peaking out at 1.1056 yesterday, the USD/CHF has been in steady decline and is trading in a tight range near the 23.6% Fib line at 1.0980. On the 30 minute chart below, we can see that the pair is trading with low volatility near the 50 period MA line. Tomorrow morning at 6:45am GMT, unemployment rates will be announced, but with a prior rate of 2.6% and a forecast of 2.6%, it’s going to take something more to get this pair moving any time soon.

USD/CAD

The USD/CAD has experienced a large upside movement after the double bottom pattern was formed 2 days ago. Today, prices corrected back down and briskly penetrated the 38.2% Fib line. News of a much stronger Canadian Ivey PMI rating of 56.2 versus the expected no-change from a prior 45.9, did little to the pair as it then arose again past the 23.6% Fib line. While prices remain above the 50 period MA on the hourly chart below and the white 21 EMA shows a sharp upward turn, we still await tomorrow’s U.S. Unemployment Claims and Pending Home Sales report, both of which have historically strongly affected the U.S. market and may in turn affect this pair as well.

AUD/USD

Prices hit a low of 0.8906 for the AUD/USD, but stayed away from the 61.8% Fib line and traced up to a high of 0.8997 after straddling the 38.2% Fib line, only to continue the downward trend that was established yesterday and diverging away from the 50 MA as shown in the hourly chart below. The white 21 EMA line began a return up to the 50 SMA line around 2pm today, but then sharply retraced back down at the time of this writing, signaling further selling strength. Tomorrow’s U.S. reports may create more volatility for this pair.

Analysis By: Harry Hsu
ForexPros.com Senior Analyst

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Today’s US Dollar Trading
USD mixed after New York
Stocks continue to lift USD/JPY
Overnight news surprises to the upside

Overnight Preview
Look for additional two-way trade to consolidate
Fade into New York expected

Looking Ahead
Wednesday is Money Management Part II in members-only broadcast room 11:00 Am CST
Thursday Balance of Trade
Friday TICS

Summary
The USD is mixed-to-weaker to end New York after initially starting the day in two-way action. Overnight the Greenback was tracking equities nicely and remained on the firm side staying mostly within Monday’s ranges and hovering around the New York closing levels. Firmer equities in Europe helped keep the USD off the lows seen against Yen and once the DJIA opened the USD/JPY remained solidly in the 107.00 handle all day. Extending gains after the London fix the USD/JPY was unable to score a new overnight high but finished the day around the 107.20/30 area making a lot of bears nervous. Stops in that pair are likely continuing to build above the 108.00/10 area but chatter suggests that more are placed in the 107.80 area close-in. Cable rallied on the back of better than expected CPI data after two-way action saw sellers try to take a stand at the 1.9500/30 area. Closing up near the 1.9620 area after the rally extended the rate looks ready to tackle offers said to be waiting at the 1.9650/60 area. Volumes on the move were not large and some desks report interest to sell on further strength. EURO had a similar day scoring stops placed at the 1.4560 area and extending the rally to the 1.4610/20 area; high print at 1.4617 before dropping back into the 1.4580 area. Volumes not impressive and the rally may have been due to thin conditions. Model and CTA-type accounts were noted on the bid suggesting that the rally may not have much more to go. Both the 50 bar and 100 Bar MA’s have offered resistance on the last few trading sessions and should that resistance hold during the next 24 hours a rotation lower in the EURO can be expected. In my view, the rally in the majors today is a “head fake”; be careful looking at the long side as volumes have been light and the only driver for the move has been poorly placed stops. Traders report few active players suggesting that the rally may not have a lot left in it. Look for a two-way overnight session and technical trade as there is light news for the rest of the week. A surprise may ignite some volatility and that is what we want to hold these USD longs.

USD/JPY Daily

R3: 108.00/10
R2: 107.80/90
R1: 107.50/60

Current Price: 107.25

S1: 107.00
S2: 106.80
S3: 106.60

Rate continues to grind sideways in range-bound action, rallies are sold and dips are bought but dips seem to be getting slightly higher in my view. Coiling for the past three weeks continues to store a huge amount of energy and when the rate breaks out the move could be 3 handles. Look for light volume breaks bought back hard; close over the 107.60 area continues to be the goal for bulls. Stops likely raised from 106.00 to 106.50 area to offer some downside potential.

EURO/USD Daily
R3: 1.4680
R2: 1.4660
R1: 1.4610/20

Current Price: 1.4590

S1: 1.4550
S2: 1.4500
S3: 1.4480

Rate retraces to the 50 bar MA which is tracking lower suggesting that the rate is testing previous S/R but bears are trying to gain control. Volumes not very large suggesting the past three days of higher prices are a “dead cat bounce”. Look for rate to suffer selling pressure above the 1.4620 area and stops for longs likely moved close-in under the 1.4550 area of previous stops. Rate needs inside range day closing lower for Wednesday to disappoint the late bulls.

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

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Overnight Asia/Europe

USD weakens after two-way trade Monday
Volumes light as traders get back from the long weekend
Cross-spreaders the focus to start
Today’s Economic Reports

None in the US today
Looking Ahead

7:30 AM CST Wednesday CPI forecast +0.3%, core +0.2%
1:00 PM CST Wednesday FOMC minutes
Summary

The USD is off to a slower and lower start this morning after quiet subdued Monday trade for the Presidents Day holiday. Volumes were lighter as expected into the Asian open last night where cross-spreading for non-USD pairs was the major focus. China announcing another large CPI number helped to pressure the USD/CNY to a new record low overnight at 7.1574 with traders expecting more to come as the upside pressure on the Yuan continues to grow. The Chinese are running out of options to control their currency and in my opinion it is only a matter of time before the Yuan just takes off regardless of what Beijing wants. Demand for the Yen crosses was the rule overnight as Aussie-Yen and Kiwi-Yen all had strong upside bias taking out near-term resistance; AUS/JPY heading for the psychological 100.00 barrier but failing to trade above. USD/JPY initially opened firmer but was dragged lower on exporter sales and general bearish sentiment traders say, some light stops reported in the 107.80 area close-in but bids at technical support held firm and the lows were limited to 107.20 exactly suggesting the rate is trading very technically right now. Firmer stocks failed to rally the pair and the rate opens New York on the defensive around the 107.50 area. Cable is weaker at the 1.9500 area as interest focuses elsewhere; low prints at 1.9451 continue to remain in established ranges with only light stops on the way down forex trading traders say. Upside was helped by EURO strength but GBP only managed a high print at 1.9545 during European trade. EURO is firmer and traders note that initial pressure at the 1.4660 area eventually gave way to strong German buying lifting the rate into stops reported at 1.4680, 1.4700 and 1.4720 area; high prints at 1.4758 cleaned out a lot of order books and traders say the door is open for a test of the 1.4780 area near-term. In my view, the majors are consolidating within established ranges and will provide good two-way trade the next few days. Aggressive traders holding shorts in GBP can look to sell strength into the 1.9580 area. EURO looks poised to try for another attempt near the top of the range and if short you might want to cover back and try again higher although the best time for that would have been yesterday’s weakness. Tomorrow’s CPI might ignite volatility so be nimble.



GBP/USD Daily

R3: 1.9610

R2: 1.9580

R1: 1.9550

Current Price: 1.9510

S1: 1.9450

S2: 1.9400/10

S3: 1.9360

Rate attracting light bids under the 1.9500 handle but that might be in sympathy with EURO and not of any real substance. Volumes are light which might be increasing volatility due to thinner conditions. Upside likely limited to the 1.9610 area of fib resistance and stops are likely out of reach above the 1.9680 area for now. Aggressive traders holding shorts can add to their positions on strength looking for a test of the lows around the 1.9400 area. Look for stops under 1.9400 to be large.



EURO/USD Daily

R3: 1.4880

R2: 1.4800/10

R1: 1.4780

Current Price: 1.4745

S1: 1.4700

S2: 1.4660/70

S3: 1.4630

Rate powers higher after brief selling pressure yesterday fails to encourage the bears. Upside likely to be tough going as resistance above the 1.4800 area said to be solid. Stops likely above the 1.4800 handle but expect solid offers again to cap any rally. Downside likely to be limited also until the bulls feel the top is in place again. Look for close-in stops to be building in the 1.4630 area where the 50 bar MA is offering support. Buy signals never negated so higher prices likely before a rotation lower.



Analysis by: Jason Alan Jankovsky in Association with The Forex Edge

Publisher: ForexPros.com

Today’s US Dollar Trading

• USD continues decline, EURO at lifetime highs
• Durables data worse than forecast
• Bernake comments hint at further fed ease

Overnight Preview

• USD likely to remain on the defense but consolidate
• Traders likely to square positions ahead of US GDP tomorrow

Looking Ahead

• 7:30 AM CST Thursday Q4 GDP forecast +0.7%
• No AM Broadcast Friday—out to Denver

Summary
As if the USD was suddenly determined to be the cause of cancer, traders sold, liquidated or simply ran from the Greenback the past 24 hours. Initially starting firm in Asia after Tuesday’s rout, the USD came under renewed attack as stops and aggressive buying fueled an advance by the majors into lofty levels; US data this morning adding to the bearish conditions. Durable Goods data came out below expectations suggesting that the US economy is worse than expected; traders added fuel to the fire and the EURO scored more lifetime highs as other pairs were also hit during New York trade. Fed Chair Bernake comments before congress underscored the market belief that the Fed intends to further cut rates to stimulate growth; Bernakes’ comments seen as suggesting the Fed will continue to ease all through 2008 and for another 100 BP. Forex Trading Traders saw a wave of aggressive buying in EURO to propel the rate to the 1.5100 handle during New York trade placing the rate a full 300 points higher since Monday’s open; a rather spectacular move and quite possibly an exhaustion top. High prints in EURO at 1.5145 and a firm close suggests another round of buyers waiting in the wings. GBP had a high print during the buying frenzy at 1.9974 but then reversed on the day to trade lower into the New York close; lows made near the close at 1.907. GBP saw Russian selling overnight and the daily studies are all overbought suggesting that Cable is done for the upside near-term. Aggressive traders can sell GBP and EURO into the close as the USD is likely bottomed for the week. USD/JPY fell into stops under the triangle consolidation overnight but managed to stave off a melt-down like the other pairs have seen; low prints at 105.94 were followed by a quick recovery to the 106.50 area suggesting the real-money demand seen under the 106.00 handle is still there. Traders look for the upside stops to be tested next as the amount of selling seen was significantly less than expected from such a long sideways coiling. Tomorrow is GDP and watch for book-squaring tonight, USD is looking very oversold in my view.

USD/JPY Daily

R3: 107.00/10
R2: 106.80
R1: 106.50/60
Current Price: 106.39
S1: 106.00/105.90
S2: 105.80
S3: 105.40/50

Brate breaks out but finds less than spectacular stops and finds support at previous are of semi-official demand and real money account demand at the 106.00 area. Although technically a breakout the volumes were not impressive suggesting that the move may be a head-fake. Look for inside range day closing higher and late shorts to put stops close-in overnight. Lows for the week may be in so look for the rate to back-and-fill the next 24-48 hours.

GBP/USD Daily

R3: 1.9990/2.000
R2: 1.9950
R1: 1.9880
Current Price: 1.9824
S1: 1.9780
S2: 1.9700/10
S3: 1.9650

Rate completes an inverted hammer formation and fails from the monthly opening range suggesting a reversal is in the works. Rally from the 1.9450 area was on relatively light volumes arguing for a bull-trap. Look for rate to fall back the next 24-48 hours; aggressive traders can sell GBP over the 1.9800 handle. Stops likely from late longs to be resting under the 1.9780 area and likely to be in size. Look for upside to attract selling and for a weak close again tomorrow.

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

Daily Forex Analysis

Today’s US Dollar Trading

• USD again on the defense
• US data below expectations, helped drive USD lower
• Some signs of reversal developing

Overnight Preview

• USD likely to remain under pressure as it consolidates
• Eurozone GDP out overnight

Looking Ahead

• 11:00 AM CST Tuesday Auto and Truck sales, no factor
• Wednesday ADP private payrolls, ISM Services, Fed’s Beige Book
• Thursday Pending Homes Sales

Summary
The USD continued to consolidate in two-way technical trade today after early strength gave way to profit taking and residual buying in the majors. Although finishing the day technically mixed, the USD remains under threat despite a severe over-sold reading across the board. Traders note that the Greenback has remained mostly inside Friday’s range the past 24 trading hours with the exception of EURO which posted another record high against the USD. Traders are still unsure what is causing the continued strength in EURO today and many desks report choppy trade and thin order books suggesting that the EURO is really reaching at these high levels. High prints in the rate came after the release of poor ISM index data; high prints at 1.5277. Ism out at 48.3 was below expectations and prompted a wave of USD selling but that seemed to be just enough to encourage a bout of profit-taking and short-covering as most of the pairs sank into afternoon trade. Despite a weaker equities market the Swissy and USD/JPY lifted off their lows to post gains in excess of a full handle higher off the lows. EURO sank back under the 1.5200 handle and targeted lows on the day at 1.5156 during New York trade suggesting a potential reversal is in the works. GBP held firm but finished lower due largely to cross-spreaders liquidating near record levels in the GBP crosses. EURO continued to weaken into the close but held at the 1.4180/90 area to end the day. USD/JPY had a low print at 102.60 for a three-year low and only about one handle from the 12 year low suggesting the USD/JPY has found near-term support as the rate made highs on the day shortly after printing the low; highs at 103.72. In my view, the severely oversold USD is showing signs of a technical bottom after today’s trade. If this week develops into a corrective week then the potential is good that the lows for the week are in. Aggressive traders can look to buy USD across the board the next 24 hours as a technical correction may be underway finally.

EURO/USD Daily

R3: ?
R2: 1.5270/80
R1: 1.5230
Current Price: 1.5193
S1: 1.5150/60
S2: 1.5120
S3: 1.5100

Bids said to extend under the 1.5150 area in waves with potential stops mixed in down to the 1.5080 area or so traders say; should those bids get pulled the next 24-48 hours the rate is setting up for a head-fake reversal as I don’t think the market is real excited about taking on more longs. Traders still unsure about what is driving the rally but many desks report stops almost all the time above and close-in. Look for volatility to get big on a liquidating break; hook reversal still valid from yesterday.

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


Disclaimer
Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Today’s US Dollar Trading

• USD has volatile day
• US data no help
• EURO sets another record high

Overnight Preview

• Traders are watching ECB closely, expect hawkish rhetoric
• Book squaring likely

Looking Ahead

• ECB and BOE rate announcements early Thursday, press conferences to follow
• 9:00 AM CST Pending Home Sales forecast –1.5%

Summary
After a solid overnight session of strong gains the USD reversed to trade lower in the New York session blowing through several layers of hard-won resistance. Big news on the day is EURO at a new lifetime high of 1.5304 on average volumes. Traders say that only a few large names were seen bidding the market higher suggesting that everyone else is sidelined. Several shops report that stops again were the first driver triggering at 1.5260 are and again at 1.5290 area but no follow-through at the highs and offers kept the rate dropping all afternoon for a post-London fix low at 1.5254; close in the 1.5260 area is below the previous high suggesting some selling pressure is coming on. Most forex traders don’t see much more upside despite potentially hawkish ECB rhetoric on Thursday; one trader asks “How Hawkish can Trichet be with EURO at 1.5300?” Today’s US data was disappointing and no doubt helped with the downside reversal today; ADP private payrolls suggest a poor NFP on Friday. ISM data today showed the second month of contraction adding fuel to the argument that the US is in a recession. Both news items contributed to a sharp sell-off from the highs seen ahead of the New York open. EURO rallied from a low of 1.5144 to post lifetime highs, Cable rallied off a 1.9718 low to post a high print at 1.9969, USD/JPY posted a 104.20 high before turning lower to post a low for the day in New York at 103.27. Other USD pairs suffered the same and across the board the USD was unable to hold gains anywhere. Traders remind that the USD is oversold and due for a relief rally. With shorts exposed to potential short-covering it would be reasonable to expect a bout of book-squaring ahead of more US data tomorrow and Friday, Pending home sales likely to be soft again but look for signs of a bottom forming. Bothe the ECB and the BOE have rate announcements tomorrow and traders expect both banks to hold rates steady. The statements will be heavily scrutinized for clues moving forward but no one expects the ECB to lower rates soon. Look for two-way action to consolidate USD ahead of tomorrow.

EURO/USD Daily

R3: ?
R2: ?
R1: 1.5300/10
Current Price: 1.5268
S1: 1.5240/50
S2: 1.5200
S3: 1.5140/50

Rate scores another high with no relief in sight near-term. Sentiment getting extreme and regardless of how bullish someone is they are staying away as this kind of price action is very unlikely and unusual. Rally off the lows driven by model and momentum accounts first getting stopped out of longs and then re-setting them traders say. Volumes into the highs not impressive and stops still building on either side making for potentially violent trade. Aggressive traders can sell over the 1.5200 handle.

GBP/USD Daily

R3: 2.0050
R2: 2.0000
R1: 1.9950/60
Current Price: 1.9907
S1: 1.9860/70
S2: 1.9820
S3: 1.9780

Rate nearly engulfs the past five trading days after starting lower on good volume, upside move just looks unconvincing as resistance caps the rally even after close-in stops were elected. Look for inside range day tomorrow as no one was looking for an upside move like this today. Traders caution that the BOE may say something dovish hinting at a rate cut leaving the GBP vulnerable to a pullback. Stops likely all over the place on both sides as the volatility is getting large.

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

Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

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Daily Forex Analysis


Overnight Asia/Europe

• USD initially firmer in Asia, breaks lower in Europe
• Traders note stop-driven trade
• Demand for EURO from Middle-East accounts noted

Today’s Economic Reports

• None of note in the US

Looking Ahead

• All eyes on US CPI Friday forecast +0.3%, core +0.2%
• Speculation growing for 75 BP rate cut next week by FOMC

Summary
The USD is lower to start New York after a firm start in Asia evaporated into European trade. Despite firmer equities overnight and follow-through from Tuesday’s strong rally the Green back failed to hold onto gains and the majors reversed back into their highs on mostly stop driven trade. Overnight desks report that demand for EURO was seen by Middle-Eastern accounts and rumors of some semi-official buying off the lows around the 1.5350 area helped push the rate into stops at the 1.5390 area. Once those stops were triggered the rate saw waves of stops layered between 1.5400, 1.5430, and 1.5450 for a high print at 1.5479 before offers capped the move again under the 1.5500 psychological barrier. Stops being triggered close-in within range is often a sign of weak hands liquidating suggesting there is a lot of early interest in the short side from the highs; I think the two-way action and covering the same ground twice is a good sign of a top trying to form. Aggressive traders can ADD to short EURO positions from the 1.5450 area. In my view, the EURO continues to be severely overbought and a top is inevitable sooner or later. If this is the top forming for the correction then there should be more clues by the end of the week and with US CPI on Friday. Forex Trading Market tops don’t need much of an excuse to break so be nimble if you are on the long side of EURO. Cable followed EURO higher into strong resistance at the 2.0200/20 area and found it tough going at the triple-top; high prints at 2.0218 were quickly sold and the rate is on the 2.0160/60 area to open New York. USD/JPY held firm most of the overnight session first holding on to the 103.20/30 area through Asia and resisting the sell-off seen in the other pairs until late in the European session; lows eventually found at 102.43 after stops under the 102.80 area were triggered. Traders note that across the board the interest in the majors appears thinner than previous highs suggesting that large names may be staying away from the long side or trying to buy dips; in either case that argues for a more limited upside near-term. Look for the USD to continue two-way ahead of CPI on Friday as the news is light until then. Expect a bout of profit taking by the shorts soon.



EURO/USD Daily

R3: ?
R2: 1.5490/1.5500
R1: 1.5470/80
Current Price: 1.5466
S1: 1.5420/30
S2: 1.5400
S3: 1.5380

Rate technically still an inside range day, highs at 1.5479 drawing good selling and overhead resistance is getting thicker with the 1.5500 figure drawing a lot of protective option defense. In range stops to the upside seen as the main driver overnight suggesting lots of early sell interest. Stops under the market likely to be close in also due to late buyers or short-term buyers. Look for a sharp break on “Fed-Speak” from Bernanke this week or Trichet overseas; the market is looking for direction in my view.



GBP/USD Daily

R3: 2.0250
R2: 2.0210/20
R1: 2.0180/90
Current Price: 2.0160
S1: 2.0120
S2: 2.0100
S3: 2.0080

Rate tries for highs one more time and is turned back at the triple-top at the 2.0220 area making the resistance a quadruple-top; very strong resistance in my view. OK to ADD to shorts from the 2.0180 area looking for a break back to the 100 bar MA again. Close under the 2.0070/80 area likely to draw a long-liquidation break. Stops likely close-in and in-range again on the way down from late longs; likely building in the 2.0130/40 area as that was good resistance on the way higher.

Analysis by: Forex Trading | Brokers | Forex Trading Platforms written by Jason Alan Jankovsky

Disclaimer:
Trading Futures and Options on Futures and Cash Forex transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Daily Forex Analysis


Today’s US Dollar Trading

• USD gives back Tuesday’s gains
• Volumes lighter but sentiment relentless
• EURO scores another new high

Overnight Preview

• Traders expect two-way action
• Likely to have downward bias continue

Looking Ahead

• 7:30 AM CDT Friday CPI forecast +0.3%, core 0.2%

Summary
The USD took it on the chin again today giving back all of yesterday’s hard-won gains and breaking to new lows against the EURO late in the session. Traders note that although the price action was two-way and seemed to be technical in nature, the volumes were lighter and stops did most of the work. Most of the chatter was concerned with who was on what side of the stops desks report and there seemed no shortage of people selling into the highs across the board; but it was not enough to overwhelm the residual bids. All the major pairs started on the defense in Asia but where quickly reversed by Middle-Eastern demand for EURO and Cable traders say. Most of the action was fairly subdued until the start of European trade when light stops were elected in EURO and GBP. Cable rallied along with EURO as stops were elected in layers; noticeably absent was the usual suspects on the Yen crosses as a technical correction was expected after the Yen’s reversal yesterday. Cable continued to climb into the 2.0200 handle by the start of New York following EURO into a high print at 1.5493 in early New York. After a brief selloff the rates got down to wrecking balance sheets as first a sharp rally followed by a sharp break followed by a sharp rally happened up to the London fix; then it was high after high washing out any selling interest into the end of New York. Forex Trading. High prints in EURO at 1.5560 and 2.0280 in GBP. USD/JPY made a show under the 102.00 handle for a low print at 101.67 but not before bids tried to lift the pair on each break from 102.50 all the way down to 101.80; traders note that both bulls and bears are thoroughly confused at this point and liquidation was seen from both sides. In my view, the lack of follow-through selling in the majors after such a nice head-start on Tuesday underscores the euphoric nature of trade at this point. In my view, traders need to be flat and wait for more clues before switching sides or again looking for the highs. No matter how you slice it, when price action begins to create more questions than it answers it is best to be sidelined until you get some answers. Until you get better clues to price direction instead of this whipsaw, stay flat and enjoy the madness.

EURO/USD Daily

R3: ?
R2: ?
R1: ?
Current Price: 1.5549
S1: 1.5520
S2: 1.5480
S3: 1.5450

Rate continues to give the bears no quarter and powers to three separate attempts at highs attracting sellers all the way. Rhetoric from ECB governors today did nothing to help the bullish momentum. Lots of reasons to stand aside and in my view it might be a good move to flatten out before switching to the long side or looking for a top. This market will not act rationally at this point and it is WAY overdue for a correction. Look for more upside to the “Oh my god!” level.

USD/JPY Daily

R3: 102.70/80
R2: 102.30/40
R1: 102.00
Current Price: 101.76
S1: 101.40/50
S2: 101.20
S3: ?

Pair retraces buying pressure from yesterday completely negating upside potential, two-bar continuation pattern likely means further declines; no chance of a rally without a change in sentiment or a “surprise” in my view. Bulls completely demoralized I think and they will likely not be looking to buy without a strong reversal pattern. Stops under the ten-year lows likely to be moved up to the 101.50 area as a break looks inevitable. No bottom in sight and a test of the 100.00 level looks next.

Analysis by: Forexpros.com written by Jason Alan Jankovsky

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