Afternoon forex wrap-up
USD bears have had a shot at
controlling the market today; the Greenback is sharply lower
against GBP, lower against EURO and flat to mixed against the Yen this
afternoon. After a quiet overnight start that saw the USD encounter early
pressure from Japanese exporters the USD got hit hard against the pound after
the release of UK retail sales data in Europe; GBP rallied through several
layers of overhead resistance and making a sordid mess of the shorts before
finally settling down to trade firm at the 1.8880 area of previous resistance.
Cable also had a brief show over the 1.8900 handle for a
high print at 1.8922 but that took care of the stops for now leaving the pair
vulnerable to some selling pressure bear-term as shorts attempt to sell the
rally. Traders note that model and momentum accounts likely the bulk of the
stops today as they were very active on the sell side of GBP earlier in the
week. EURO tracked cable higher as well taking a look at stops close-in at the
1.2750 area; high print 1.2754 before settling back to trade firm at the
1.2730 area. Traders note that stops are likely higher in this pair as recent
weakness has convinced the EURO bears that lower prices are possible and they
may be running wider stops at this time. USD/JPY has remained range-bound with
all the action elsewhere but is unable to attract any interest from either
side ahead of the G-7 meeting this weekend.
Early calls for no mention of the Yen in either the council
meeting or the communiqué has lead some traders to remain very cautious ahead
of the weekend; a long-liquidation break is very likely if the G-7 suggests
that recent Yen weakness is a “concernâ€. No speculation yet as to whether or
not the BOJ might attempt a round of intervention to slow the Yen’s descent
but that certainly is a possibility under certain circumstances; the BOJ has
not attempted a round of intervention since 2004. In a not unexpected move,
the SNB hiked interest rates 25 BP today giving the Swissy a brief lift but
since then the pair has given back all those gains. Traders now see a
potential near-term top in USD/CHF around the 1.2350 area should offers extend
that high and new buying lightens ahead of there. In my view, the USD is
poised for further losses against the majors to end the week. There is a huge
amount of focus on tomorrows US CPI data and traders are bracing for a lot of
volatility tomorrow; should the data disappoint USD bulls the majors could
make their highs for the week before the close tomorrow. Look for lighter
trade and book-squaring tonight; the USD should open weak in New York
tomorrow.
EURO/USD Daily
R3: 1.2890/1.2900
R2: 1.2850
R1: 1.2820
Current Price : 1.2793
S1: 1.2760
S2: 1.2740
S3: 1.2720
Pair respecting the developing uptrend and holds fib
retracement nicely for four days now suggesting that shorts do not have the
potential to push the market any farther; look for a massive short-covering
rally if rumored stops above the 1.2820 area are triggered. High for the week
and high close for the week suggest a bit more is on the way tomorrow if US
data disappoints.
GBP/USD daily
R3: 1.9200
R2: 1.9080
R1: 1.8920
Current Price : 1.8890
S1: 1.8840
S2: 1.8760
S3: 1.8700
Cable firm across the board, volumes not impressive but
still a good range for a short covering rally. Look to buy a pullback. On good
volume as late shorts are needed to provide potential for a rally to continue.
Close above the 1.8900 are confirm bulls in control for now. Test of 2006
highs likely should the pair trigger stops at 1.
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