Stops close-in result in two-way action - Morning Session - GMT

Today’s US Dollar Trading
• USD fails to extend overnight strength
• Volumes better
• Stops close-in result in two-way action

Overnight Preview
• Look for more two-way action
• USD is getting “tired” I think

Looking Ahead to Wednesday
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

Summary
To finish today the USD is off its highs against all pairs but still in positive territory against EURO and GBP; traders note that volumes were better today but that might have been due to Oil’s wild ride pulling in smaller day-trading type accounts. Volatility was high earlier when the majors made highs against the USD in the New York session but all the pairs are finishing more in the mid-range making today’s trade a bit more inconclusive. Sentiment is still favoring the USD near-term and with a lighter calendar to end the week the potential for continued two-way trade is higher. As discussed yesterday, short-term accounts have had a lot more opportunity while the longer position accounts have had to hold through whipsaw. EURO is lower and unable to hold the 1.4700 handle after a try earlier in the day; traders note that technicians are expecting a further drop into the low 1.4500 handle soon but in my view, that would be a buying signal. Shorts were seen liquidating on the break and should further declines be in the works look for low-volume drops followed by higher volume rallies soon. Tomorrow’s Oil inventory data likely to cause a bit of volatility in that market which will likely spillover into EURO and GBP. Cable was also unable to hold the 1.8400 handle on the earlier recovery making for a bit more challenging trade in that pair from the long side. Today’s FOMC minutes late in the day was little help for the GBP bulls as a recovery in that pair needs a steady-to-dovish Fed policy and no hints of that were seen in the minutes. USD/JPY continues to grind sideways and under resistance after failing at the highs again today; stops as expected were seen on the dip into New York lows on the day but bids supported at the same previous level making for another round of two-way trade. USD/CAD is looking weaker and lows at 1.0410 are just shy of the reported large stops under the 1.0400 handle. Tomorrow’s Durables data may be enough to drop that rate into stops but the recovery back to the mid-1.04’s shows the bulls are still trying to take control after the large drop last week. In my view, it’s another day of business as usual making the USD bulls a bit more bold. If there is no upside follow-through on durables tomorrow the highs for the week may be in and a correction in the majors can continue. 

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