Afternoon US Dollar Wrap-Up

After a slew of USD neutral-to-poor news this week combined with technical inspired trade the USD ends the week mixed against the majors in what will later prove to be a pivotal week for the Greenback in my view. The BOJ failed to hike rates in what is now being seen as a government-coerced pause in the plans for tighter credit in Japan; traders note that if the BOJ is being pressured by government then monetary policy will suffer as well as the prospects for the Yen.

Cross-spreading has been evident in the USD/JPY pair as well as others as traders again work the carry trade to their advantage. Analysts note that the USD/JPY has had virtually no pull-back from the recent strength and that caution from the long side is urged. Next week US data is light on the economic calendar and the risk of a long-liquidation break is likely if any mildly USD-bearish news may surface. Technically the USD/JPY is also overbought and volumes have been lighter; today’s “doji” star close also argues for a near-term Yen rally to correct the overbought conditions. Cable has held above the 1.9700 handle again but traders see more upside pressure in the 1.9800 area should the rate attempt to make new highs near-term. Traders note that bullish enthusiasm for the GBP is on the rise and the preferred strategy is dip buying; technicians see the 1.9580 area as critical to continue the upside rally. A close below the 1.9600 to 1.9580 area likely to stimulate a bout of Long-Liquidation.

EURO continues to flirt with the 1.3000 area but unable to keep a firm hold on the handle; although traders note that pair feels lighter than expected. Some traders look for the EURO to breakout to the upside ahead of the end of Q1 but in my view a solid range between the 1.3300 area and the 1.2900 area is likely to develop near-term. The EURO still needs more from the ECB this quarter before a rally into new highs is seen; I look for the pair to range trade this week but with a firm tone. Look for the USD to weaken during the week next week but it appears that volatility will likely rise.

GBP/USD Daily

R3: 1.9830/40

R2: 1.9800

R1: 1.9770

Current Price : 1.9734

S1: 1.9680

S2: 1.9620

S3: 1.9580

Rate at technical resistance in the 1.9750 area or so; look for some kind of a pullback near-term but that dip will likely be bought. Traders say a run for new highs not out-of-the-question but large offers have capped at 1.9800 area before. Check V/OI data today for clues to liquidation pressure and if it is building.

USD/JPY Daily

R3: 8420

R2: 8400

R1: 8340/50

Current Price : 8312

S1: 8290

S2: 8250

S3: ?

Rate continuing to weaken mostly on aggressive cross-spreading and carry trade action. Break of 8300 area this week suggests potential for further weakness but volumes on the move were not convincing and today’s “doji” star close argues for more time in this price area and then a rally. Look for volatility to increase in two-way trade.

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Jason Jankovsky


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