In true Capitol Hill style congress has delayed reaching a firm agreement on the potential bailout of the US financial system; adding conditions and requirements that promise to derail reaching a solution to the cash-strapped banking system. Adding fuel to the fire is weak housing data; despite the fundamental weakness in the overall economy investors bought equities today driving the DJIA to triple-digit gains led mostly by the financials. GBP fell sharply once news broke that the bailout plan was “nearing a solution” but as was discovered later that means “we’re talking about it”. Low prints in cable at 1.8305 making a near-term top in place suggesting that the USD will whipsaw through the end of the week as all the majors sold off in heavy trade. EURO low prints 1.4559 drew stops and active selling as late long threw in the towel and new shorts pressed their advantage. Traders report volumes were heavy on the move lower suggesting that if lows hold the resulting buy-back will be huge. USD/JPY led the complex higher as stops above the 106.30 are and more above 106.60 were triggered for a high print at 107.03 before aggressive sellers capped the move. In my view the USD is simply reacting to potential solutions to the uncertainty but the fact is there will be no resolution before next week leaving the USD vulnerable to whipsaw. Traders note that smart money is not finding confidence in the US congress to reach a solution near-term and are either sidelined or looking to sell USD on rallies. USD/JPY highs were sold heavily as were Swissy and Loonie. Early lows were bought back hard on technical factors and euphoria but the advance lost steam as the market ran not a brick wall at the high prints of 1.0945 and 1.0394 respectively. Some brain-dead congressmen are trying to add “healthcare” issues to this bill and that will no doubt cement the world’s point of view that no bill will pass by Monday. In my view; it is time to get short USD and close your eyes. The next rally will be the last USD strength seen for months and aggressive traders need to be ready to sell with both hands.

Analysis Provided by: Forexpros.com - Written by Jason Van Jankovsky