Afternoon US Dollar Wrap-Up

The USD is mixed to end New York after a mostly technical overnight session that continued to see traders debate the future of the Yen carry. Analysts note that the major pairs appear to be focused on the weak JPY side of the crosses and most of the major Yen pairs are all higher. USD/JPY continues to grind higher and is the only USD pair major firmer on the day as the EURO, GBP and CHF all advance into areas of reported resistance. Volumes are modest across the board traders say with any residual USD strength on the EURO and GBP being met with semi-official and sovereign names traders say.

GBP held the 1.9460 area of reported support spending very little time under the 1.9480 area; late rally pushing the GBP to a high print of 1.9603 before a correction back to the 1.9550 area. Support for the GBP will likely be the 1.9530 area where recent closes and weekly opening ranges have appeared to hover; traders note that stops on the way up from the sell-off last night were concentrated in the 1.9530/50 area initially with more at 1.9580. Traders note that for the week the GBP has had four solid days of two-way trade with both sides feeling the pain suggesting that the late shorts might cover into overnight action Friday leaving the Bulls in charge ahead of the weekend.

“Buy the dips” remains the favored strategy in the EURO today as selling pressure down through the 1.3100 handle for a low print of 1.3080 was met with semi-official and sovereign names traders say. Analysts continue to watch the 1.3160 area as the pivot point and suggest that stops layered above their likely will have one test the next 72 hours. Today’s high print at 1.3146 was just shy of offers said to be at 1.3150 arguing for aggressive traders willing to step up anytime. Rate remains firm into the close. In my view, the USD is setting up again for another sell-off near-term.

The top of the range has been reasonably well-met in the USD/JPY and the other pairs are already retracing recent losses suggesting that the USD/JPY is “late” due to heavy focus on the crosses. Watch overnight rhetoric from Asia for clues to selling pressure; I think any reasonable word from BOJ members could spark a sell-off as the market appears a bit nervous at the highs recently.


R3: 1.3250

R2: 1.3200

R1: 1.3150/60

Current Price : 1.3136

S1: 1.3100/1.3090

S2: 1.3050

S3: 1.3020

Rate respecting breakout area of 1.3100 or so as the trendline support as well as the 50 bar MA comes into play on today’s action. Look for an aggressive short-covering move the next 72 hours as late shorts are disappointed. Upside at 1.3200 likely to hold offers but stops layered above also and a test of that area likely near-term. BUY EURO under the 1.3140 area.


R3: 8380

R2: 8320

R1: 8280

Current Price : 8250

S1: 8200

S2: ?

S3: ?

Rate returns to the lows again but volumes are lighter; the bears will just not let go of the carry trade. Look for a rise in OI from last week in COT data but be very cautious about putting shorts out. I think this is a bear-trap so look for bids to support tomorrow and into next week. Range trade OK for the carry so if Yen stays in between 8250 and 8450 the carry trade will remain valid and in focus.

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Jason Jankovsky

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