Afternoon forex wrap-up
After a quiet two-sided overnight
session with USD on the defensive, GDP data released today gave the
USD bears a bit more to work with but the greenback held near-term support
against the majors amid light volume. Forecast at +3.0%, GDP came in at +2.9% up
from earlier estimates at +2.5% showing the economy is still in the growth mode.
Comments from Fed Reserve governors today again stressed that the Fed is neither
confirming nor denying the potential for additional rate hikes moving forward
but most analysts are quick to point out that the markets most likely have not
priced in an additional rate hike by the Fed at this point but rather have
leaned more to the point of view that the Fed rate hike cycle is officially
over.
After a brief rally to existing resistance numbers on light
volume, the major pairs retreated to stay confined in a narrow 20-30 pip range
off the highs but above the overnight lows looking very much like a point of
indecision to me. Also of note are the reports that model, momentum and system
accounts were active on the buy side of GBP and EURO shortly before the report
and shortly before the markets made lows for the US trading session. Analysts
point out that record high long positions still exist in IMM futures suggesting
that further gains will be difficult and that a corrective rally in the USD will
be needed to wash out stale GBP and EURO longs. Cable rallied into the 1.9050
area in lighter volume today after GDP and fell back to trade the 1.9020/30 area
for most of the day with slight blips higher falling back almost immediately.
Hourly studies are showing signs of divergence and overbought
readings suggesting that the USD bears may need to take a breather in here soon.
EURO had a similar trading range posting a high print at 1.2854 before falling
back to trade 1.2820/30 all day. Traders note that the only pair to remain well
bid today was USD/JPY holding the 117.00 handle all day and posting a high print
at 117.29 as light stops above the market were triggered although offers were
mixed in. In my view, today’s lack of upside follow-through is a caution for USD
bears. Overnight USD short-covering is likely and ahead of US NFP data due
Friday. Between now and then, the economic calendar is light with only Chicago
PMI index forecast at 57.0 due out Thursday. Michigan sentiment is due Friday as
well but focus will be on NFP. In my view, look for the majors to retreat
tonight and ahead of NFP Friday as traders square books.
GBP/USD Daily
R3: 1.9150
R2: 1.9120
R1: 1.9080
Current Price : 1.9048
S1: 1.9000
S2: 1.8940
S3: 1.8880
Caution urged for those holding new short positions, expecting
a lower close and a failure at the top end of resistance; current price strength
may draw in late buyers but volumes are light suggesting this may be a “head
fake†into the highs. Stops building under the pair at 1.9000 area traders say.
Model account on the buy side is a good sign the rate will fall near-term.
USD/JPY Daily
R3: 8700
R2: 8640/50
R1: 8590/8610
Current Price : 8561
S1: 8550
S2: 8500
S3: ?
Four times at support and each time the volume is lower
suggesting the pair is running out of sellers willing to take a stand here; look
for a massive short-covering rally in the next few days. 50 bar MA likely to cap
any move higher first time through; residual sellers still needed to sell into a
rally late. Look for no follow-through tomorrow ahead of Friday US data.
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