Morning Forex Briefing
The USD is mixed to firmer today after a quieter Asian start. Remaining in tight ranges overnight the USD continued to attract buyers but offers continued to be found on every advance. The release of UK PMI data and Euro-zone CPI helped the USD bulls a bit and stops were elected in the GBP and EURO driving those pairs into next-level support zones but existing established ranges are holding and traders expect that the GBP and EURO are a bit over-sold this morning. Both pairs are rebounding already at the start of New York trade and this morning’s ISM non-manufacturing number may help the USD once again. Traders note that hedge funds have been selling GBP while semi-official names have been on the bid; EURO is tracking lower in sympathy with no help coming from cross-spreaders.
Traders note that the EURO/JPY cross is being heavily liquidated which may be weighing on EURO as well. USD/JPY has lost ground overnight with no real news from Asia or Europe. Analysts note that the China Press has called for the government to allow the Yuan to rise in value a modest 5% a year to help offset trade imbalances and cool the economy; no response from Beijing so far but you can assume the typical denial rhetoric. The PBOC has set the Yuan rate at 7.8073, a post 2005 revalue high. In my view, the USD has completed the technical correction higher needed to feed the bulls. Look for a fall-off in the USD to end the week, today’s data will likely create some volatility but tomorrow’s NFP data is likely to disappoint the USD bulls. Should the majors resume their uptrend here in the second week of January I think we can look forward to a solid rise across the board into the FOMC meeting in late January. I would be a buyer of GBP/USD at this level, a seller of USD/CHF and a seller of USD/JPY. Buying EURO is also attractive but there is a bit more potential downside there so more conservative traders may want to buy a dip back to the low end of recent trade.
USD/CHF Daily
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R3: 1.2400
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R2: 1.2360/70
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R1: 1.2320/30
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Current Price : 1.2304
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S1: 1.2260
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S2: 1.2200
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S3: 1.2120
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Pair completes a 50% retracement of recent down trend; fall back below the 50 bar MA is likely and aggressive traders can short the market anywhere above the 1.2300 area with good confidence. Stops noted on the way up suggesting that the sentiment was bearish but late traders were caught wrong-footed into the new year. Look for a bit of volatility today but a lower close for the week.
GBP/USD Daily
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R3: 1.9560
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R2: 1.9520
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R1: 1.9480
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Current Price : 1.9449
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S1: 1.9400
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S2: 1.9380
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S3: 1.9350/60
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Support rumored to be layered from 1.9400 down to 1.9350 area with stops mixed in suggesting that the rate is looking for support above the 1.9400 handle. Today’s low at 1.9396 was rejected hard in stop-driven trade and is very close to the 38.2% fib defense along with the 50 bar MA. Look for a bounce in here and aggressive traders can buy anytime in my view.
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Jason Jankovsky
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