Afternoon US Dollar Wrap-Up

The USD continued to assault the majors today after a quiet start overnight Asia. Initially weaker to mixed in Asia the Greenback gathered a bit of steam into early European trade as technical buyers continued to overwhelm aggressive sellers and large names. Traders are still a bit surprised at the recent strength in USD but are also suggesting that a top is coming very soon as studies are running into overbought conditions and underlying fundamentals may not justify such a lofty USD at this point.

Adding fuel to the fire for a fall back, the BOE unexpectedly hiked rates 25 BP this morning catching traders by surprise and shorts in cable had to quickly cover. After a sharp rally into the 1.9530 area the GBP fell back in what can only be described as a whipsaw; low prints after the rate hike in the 1.9400/1.9390 area. GBP since a bit firmer but the non-USD cross spreaders and outright speculators all got their accounts mauled on the volatility.

EURO saw a muted response to the move in GBP initially tracking the rate higher but once the ECB announced no change in rates the EURO came under a bit of liquidation from the 1.3020 area. More selling came on once Trichet had his press conference and removed the word “vigilant” from his remarks. Nothing is more absurd in my opinion than attempting to set monetary policy by the use or non-use of a particular word by the chairman of a central bank but there you have it. EURO fell abruptly into new lows for the session and the month making a technical low at the 1.2881 area. EURO is now within 50 pips of the 100 bar MA which may offer a bounce but sentiment is decidedly negative after the rate failed to hold on sovereign and official buying all the way down starting at 1.2970 overnight.

USD/JPY rallied on sympathy/default by non-USD cross spreaders as carry trades again went into the mix as traders bought everybody and sold Yen. Rumors that the BOJ is “not happy” with the USD/JPY rate at 120.00 and above will likely keep some pressure on but with the pair easily erasing offers all the way to 120.70 area the USD bulls appear to have crushed the opposition at least near-term. In my view, the prospect of a USD rout has never been better. Although the Greenback appears to be relentlessly bullish it is important to note that nothing in the fundamental picture has changed enough to warrant the USD to make a two year high against the Yen. I think this is euphoric buying by late speculators and cooler heads will prevail. Look for the USD to fall off overnight as profit taking hits heading into Friday.


R3: 1.9580

R2: 1.9520

R1: 1.9480

Current Price : 1.9453

S1: 1.9400

S2: 1.9360

S3: 1.9320/30

Long wick on today’s action may indicate late sellers but follow-through tomorrow may negate their point of view. Surprise hike by the BOE help late shorts cover but new longs still under threat until a close over the 1.9580 area in my view. Look for solid two-way trade but buying the dips is the best move in my view. I think a test of the 2006 highs is coming soon.


R3: 8460

R2: 8420

R1: 8400

Current Price : 8375

S1: 8350

S2: 8300

S3: ?

Stopped out on longs and no recovery suggests that there is still more downside to go before buyers appear. COT data tomorrow likely to be closely watched and should a significant rise in open short futures be shown the risk of a rally is higher. So far, the rally doesn’t want to happen so I think caution on the long side is urged but a bottom is coming in my view. Look for the clues and be ready to move.

Please see for details

Jason Jankovsky

Trading Futures, Options on Futures, and off-exchange Foreign Currency 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. The information contained on this email does not constitute a solicitation to buy or sell by Infinity Futures, Inc., and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law.