Model accounts selling USD - Evening Session - GMT

Overnight Asia/Europe
• USD starts weaker in Asia
• Continues weaker in Europe
• Model accounts selling USD

Today’s Economic Reports
All times EASTERN (-4 GMT)
• 8:30am USD Core Durable Goods Orders m/m
• 8:30am USD Durable Goods Orders m/m
• 10:35am USD Crude Oil Inventories

Looking Ahead to Thursday
All times EASTERN (-4 GMT)
• 8:30am USD Prelim GDP q/q
• 8:30am USD Unemployment Claims
• 8:30am USD Prelim GDP Price Index q/q
• 10:35am USD Natural Gas Storage
Big day for news with our trading partners, expect some whipsaw.

Summary
The USD is on the defensive this morning after early pressure in Asia gave way to active selling. Traders note that model and macro accounts on the offer for USD overnight; taking the major pairs into new territory for the week in most cases. Tracking EURO higher, Cable has rallied back into the 1.8400 handle with a high print at 1.8491 during late European trade. Stops were noted in-range over the 1.8420/30 area with more noted at 1.8480. Economic news was light overnight and technical levels likely will continue to offer solid S/R resulting in two-way trade but today’s US data may be enough to extend the USD fall if the news is below expectations. EURO rallied through stops at the 1.4700 handle and more at 1.4720/30 for a high print at 1.4775 on comments from ECB’s Weber and Smaghi; both men reiterated the banks concern over controlling inflation and reducing a wage-price spiral. EURO has now put in a second “X” reversal from the toolbox suggesting that the technical picture is turning bullish despite a brief show under the 1.4600 handle this week. EURO had additional help from cross-spreaders as the EURO/JPY was pressured higher but the Yen is mixed this morning. USD/JPY is off the highs and making a new low on the week at 108.69; traders note model and macro accounts selling USD in Asia for Yen and Sterling. Stops noted in that pair at the 109.00 area after stops in-range were cleared at 109.20 area; traders remind that this pair has spent a lot of time in two-way rangey trade the past few weeks and a breakdown to test support under the 108.00 handle would not be unexpected. Tracking USD/JPY lower is Swissy as that rate also trades to a new weekly low. Low prints in USD/CHF at 1.0915; stops likely under the 1.0880 area with bids ahead suggesting the rate will continue with two-way trade. In my view, the USD weakening early today is indicative of the upside cap in the Greenback; the overall downtrend is still secure and the recent rally is overblown. With oil set to resume its uptrend today upside pressure on EURO will continue through the end of the week in my view. Look for the USD to continue under pressure today and for US data to add weight later today. In my view, the Durables data is not a market mover but with recent uncertainty in the USD any minor report can set-off some volatility; be prepared for some whipsaw but once things settle down expect the Greenback to continue lower.

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