Today’s US Dollar Trading
• USD goes one way, biggest daily loss in years
• Stops and active selling seen
• Volumes better later in the day
Overnight Preview
• Look for follow-on selling
• Likely a quieter night as many are sidelined
Looking Ahead to Tuesday
All times EASTERN (-4 GMT)
• 10:00am USD Fed Chairman Bernanke Testifies
• 10:00am USD HPI m/m
• 10:00am USD Richmond Manufacturing Index
Summary
The USD bulls got their horns sawed off today as the Greenback is set to have its worst one-day loss since 2001; traders note that ongoing uncertainty with the US bailout of the banking sector, weaker equities in response to the crisis and soaring Crude Oil prices combined to give the USD a knock-out punch today. Falling to the worst levels on the day near the close traders hold little hope for anything more than a “dead cat bounce” over the next few days and many USD bulls have moved to the sidelines as support after support numbers got trashed. GBP rallied three big figures off the Asian lows scoring a high print at 1.8593; tracking EURO higher. Trader’s note that stops were triggered at each new high and active bids reported from official sources suggesting that the rate has a change in the underlying psychology; aggressive traders can buy shallow dips with confidence I think. EURO rallied as well knocking off a whopping four big figures from the lows for a high print at 1.4819 in late New York; traders note the same buyers all day and liquidity was good after the London fix. Aggressive traders can buy shallow dips but both EURO and GBP are looking very toppy and after a move like today a retracement with high volatility is due. USD/JPY broke back through the 200 day MA to find good size stops on the break back under the 106.00 handle; new lows accelerated for a low print late New York at 105.29 finding stops under the 105.50 area in size traders say. The rate had patchy volume early but once equities dropped late in the day active sellers emerged in addition to resting orders. Swissy has dropped through support as well for a low print at 1.0735; Loonie found big stops under the 1.0420/30 area for a low print at 1.0313 as active selling overwhelmed the fragile bulls. In my view, today’s action suggests that the underlying USD weakness has reasserted itself for the larger fundamental issues facing the US economy. Although a retracement is expected and likely will be larger due to the range today, it is unlikely that the USD bulls have the muscle to attempt to take control of the currency. Look for follow-on selling overnight and whipsaw after today’s one-way action. Technical traders will likely stand aside as well making for lighter trade unless the panic that hit equities starts to hit the Greenback.
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