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The dollar added to overnight gains against the European majors as profit taking tripped stop loss orders and propelled the greenback higher. FX traders continued to disregard an overnight selloff in US equities and news of a new terror alert for the July 4 holiday. EUR/USD fell to a day's low of 98.20 while GBP/USD reached a low of 1.5275. Meanwhile, USD/JPY continued to hover in a tight range around 120.00 as Friday's intervention fears and Monday's retreat in EUR/JPY helped the dollar higher against the yen.
EUR/USD broke below key Fibonacci support at 98.63, the 38% retracement of the 96.60 to 99.90 rally but steadied at the 50% retracement at 98.23. A break of today's low of 98.20 would target 98.10 and 97.84 (62% of same move). Any further correction today should hold above the 97.85/65 area and ultimately above trendline support at 96 cents before a resumption of the uptrend to target parity again.
USD/CHF broke through resistance at 1.49 and rose over one franc to a day's high of 1.4965 before retracing some of those gains. Technical resistance at 1.4960, the 50% of 1.5185 to 1.4735 held today and followup resistance at 1.5000/15 is seen capping the upside. Support is seen at 1.4890/4900, 1.4840 and 1.4820/10.
GBP/USD also fell alongside the euro and Swiss franc, reaching a session low of 1.5275 after it slipped below the 1.53 mark. Congestion around the 1.5225/1.53 area should hold the pair today, with followup support seen at 1.5175 and 1.5125.
Monday night the State Department alerted Americans to another possible attack. But an overwhelming amount of travelers will not change their plans and say the alerts are not helpful. However, markets were down overnight, with WorldCom's announcement that it may have more fraud to account for. Shares plunged pushing the NASDAQ off 59 pts or 4% at 1403, its worst level in 4 years amid continued erosion of trust in corporate America. The Dow fell 133 pts or 1.4% at 9109 while the S&P500 lost 2% at 968.
While US markets will shut on Thursday in observance of 4 July Holiday, FX markets will have the ECB interest rate decision at 7:45 AM EDT followed by the post meeting press conference at 8:30 AM. Then on Friday is the June US labor report, which is expected to show the jobless rate increase to 5.9% from 5.8% with job creation around 100k in June.
Comments today from Japan's Economics Minister Takanaka and Toyota that the yen may be overvalued helped put a floor under USD/JPY. Markets are also wary after the MoF's Mizoguchi warned that he would act in the forex market if necessary since rapid moves are undesirable.
USD/JPY was little changed as it tried to regain the 120 mark. Resistance is seen at 120.25/30, which is near the 38% retracemement of the 121.98 high to Friday's 118.36 low. Subsequent resistance found at 120.65/70. Only a break above 120.25/30 would clear the way for further gains and failure could result in renewed weakness targeting 119.70/60 followed by 119.35/20.