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The USD is firmer against the majors with the better
performance seen against cable as New York gets underway. Traders
note that the Greenback remained firm in Asia as book squaring was seen ahead
of the BOJ policy meeting. Although no change in rates is expected at this
time the stronger Japanese GDP numbers released earlier this week have
suggested that a rate hike is coming as early as next month so traders will be
closely watching for hawkish language in this week’s statement. Should the BOJ
hint at a rate hike traders expect the USD/JPY pair to sell-off at least
near-term. To start New York, the USD/JPY is still holding to an inside range
day from Monday’s large move; high print at 118.19—a double top from
yesterday. Traders note that exporters have been on the offer above the 118.00
handle suggesting that a USD rally may have capped overnight.
Disappointing UK inflation data was seen as dovish by analysts in the UK this morning; coming in at +27K for the quarter and running at a 5.6% annual rate, unemployment is running at a higher rate than the BOE target suggesting that the BOE will have to lower rates sooner than expected. Cable sold off on the news after coming in weaker from Asia; rate found stops under the 1.8940 area and more under the 1.8900 area. Additional selling took the rate to the lows at 1.8840 area before resting bids held GBP on support. Current pricing is about where traders feel a bounce might come from so aggressive traders can buy GBP anytime. EURO continued to slide in sympathy with GBP but not quite as sharp of a break; low print 1.2776. EURO found stops under the 1.2790 area but since has recovered suggesting that the rate is ready for the bounce as well. Offers said to be in place at the overnight highs in the 1.2840 area keeping the pair in a tighter potential range. In my view, the USD has once again covered the same ground twice making it a tough trade for position traders.
Shorter-term traders have had a lot of opportunity to take trades from both sides of the market and that will likely continue at least through tomorrows US data. Look for US data to disappoint the USD bulls tomorrow and the majors to rally back and test the high end of their recent range against the USD.
USD/JPY Daily
R3: 118.80
R2: 118.60
R1: 118.20
Current Price : 118.02
S1: 117.60
S2: 117.20/30
S3: 116.80
Pair continues to trade inside established ranges and once again offers an opportunity to short above the 118.00 handle. Resistance is at the 50 bar MA and the 50% fib number at 118.30/40 area but traders say stops are likely above with real money offers ahead of 118.60 area. Look for continued two-way trade ahead of US data tomorrow. Close above 118.40 will encourage bulls; below 117.40 for the bears.
GBP/USD Daily
R3: 1.8980
R2: 1.8920
R1: 1.8880
Current Price : 1.8857
S1: 1.8810/20
S2: 1.8780
S3: 1.8750/60
Pair falling back on stops and active selling. Watch news for model/momentum accounts on the sell side today or tomorrow. Expect rate to bounce at least once from this area of key support, 50 bar MA offering solid support along with 50% fib defense. If US data disappoints tomorrow expect rate to recover and test the 1.8950 area or previous support. OK to buy for the pull in my view.
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