Morning forex briefing
The USD is trading in tight ranges after a very two sided overnight session and is currently an inside-range day against the majors.
Starting New York firm but off the highs, the greenback has had almost no reaction to the outcome of US elections. In a democratic party upset, the US House is now controlled by the democratic party after winning 229 seats but the outcome of the Senate race is still not certain. Most likely the Republicans will retain control of the Senate after the remaining races in Montana and Virginia. Traders note that volumes have been light and action mostly technical while the overnight session digested the results of the election; no real progress either way for the USD to start New York.
Cable has seen some selling pressure at the 1.9100 area again overnight; the “usual suspects†on the offer near the highs trader’s say. On the bid near the lows traders say Middle-Eastern sovereign names were seen at the 1.9060 area but the rate is still struggling as some technical studies appear to be overbought. EURO is firm this morning but also saw early selling capping the rate at the 1.2800 area; high print 1.2806. Traders say the pair is likely to range trade until the release of US data tomorrow; close in stops remain a risk but big money names appear ready to step in on either side near-term keeping potential for a break-out smaller.
USD/JPY is suffering the same fate as the other majors this morning and is confined to a tight 40-pip range inside Tuesday’s range; traders say the pair is likely to trade technically for the next 24 hours ahead of US data on Thursday.
Across the board, the USD has had little impact from the election question and traders are now watching the BOE MPC rate announcement and the US Balance of Trade data both due up on Thursday. Forecasts are for a 25 BP rate hike by the BOE and a slightly lower trade deficit of -66.0B; in the case of the GBP it is likely going to be a case of “buy the rumor/sell the fact†for cable. Traders are pricing in two more rate hikes by the BOE during the next few months and with cable hovering around the 1.9100 area it appears at least a retreat near-term is in the works because the USD has had plenty of bearish news the last few days and cable hasn’t traded to a new high on three attempts. In my view, the majors are setting up for a break lower but that break could be sharp and fast; classic buy signal in an up trending market I think. Look for higher priced USD near-term.
GBP/USD Daily
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R3: 1.9180
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R2: 1.9130
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R1: 1.9100
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Current Price : 1.9060
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S1: 1.9020
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S2: 1.8980
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S3: 1.8950
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Pair hovering just under the 1.9100 handle in what appears to be a classic topping formation. “Doji†star for the day so far, overbought indicators lagging the rate and low volume suggest the pair is set to retreat into sell-stops. Look for a pullback the next 24 hours but expect to find support at the 1.8880 area of the 50 bar MA. Aggressive traders can sell anytime.
USD/JPY Daily
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R3: 118.20/30
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R2: 118.00
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R1: 117.80
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Current Price : 117.60
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S1: 117.20
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S2: 116.80
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S3: 116.60
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Pair looking to rally I think but expect pressure at the 118.20 area after close-in stops are triggered; pressure from 50 bar MA likely to be absorbed as technical traders feel pair is oversold and stops below the pair are out of near-term range. Look for two-sided action to continue but rallies are selling opportunities I think. Stops over 118.50 area said to be thick; under 116.80 also.
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Jason Alan Jankovsky
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