Monday’s Forex Briefing
The USD is trading mixed to start
the new York session, up slightly from Friday closing levels
against the Yen but slightly weaker against GBP; flat against EURO. Although
the USD fell to a new 2006 low against the EURO and cable overnight traders
note that the markets appear to be technical in nature to start the week and
early strength may have been simply follow-through buying by system traders.
IMM COT data released on Friday show that speculators increased their net long
position in the EURO and GBP but both markets are far from record open longs
suggesting that this rally may have more to go before the USD is ready for a
solid correction.
Fundamental news was light overnight but traders note that M
& A activity lifted cable into reported stops but supply from a German name
capped the rally at 1.9841; very lofty pricing for GBP analysts say. Stops
said to be building under the 1.9720 area but so far this morning the
overnight lows at 1.9723 are holding. EURO saw a high print at 1.3369 before
semi-official and sovereign names were seen on the offer; traders say that
prop accounts were active on the offer as well overnight. USD/JPY saw a bit of
pressure as well but held the Friday lows making Monday an inside range day so
far; the PBOC marked the Yuan at a record high against the USD overnight and
that may have put a bit of pressure on USD/JPY as well. Overnight reports of
an explosion in North Korea are unconfirmed but general nervousness RE: the
country’s nuclear program continue and may have helped rally the USD/JPY into
reported stops around the 115.80 area; high print 115.85 in Asia.
In my view, today is just “business as usual†after a strong
one-direction previous week. Traders are nervous as to further gains for the
majors ahead of important fundamentals late this week, analysts note the USD
has held significant support in a few pairs, and traders need to close their
books for the year soon. It would be reasonable to expect a correction in the
USD higher; look for the majors to remain two-sided for the next 24 hours or
so then begin to slide off. I am looking for the USD to firm by the end of the
week but once this correction is out of the way the greenback is likely going
to start 2007 weaker.
USD/JPY Daily
R3: 116.60
R2: 116.20
R1: 115.80
Current Price : 115.54
S1: 115.20
S2: 115.00
S3: 114.60
Pair inside range to start the week, two-sided trade in
reasonable volume suggesting a point of indecision. IMM data suggesting that
USD longs were liquidating the past week but not that new USD shorts coming to
the table. Until the Longs flip to short, the pair likely to remain within
established ranges near-term. Close-in stops building above the 116.00 area
traders say; below 114.80 also.
GBP/USD Daily
R3: ?
R2: 1.9880
R1: 1.9840
Current Price : 1.9763
S1: 1.9720
S2: 1.9680
S3: 1.9550
Pair over-extended to the upside in my view, double-top
likely forming at the 1.9800 area. Aggressive traders can short anytime above
the 1.9780 area, failure at the high from here likely to draw huge selling
interest for a near-term reversal. Stops said to be close in and building
under the 1.9720 area. Look for a close under 1.9720 to trigger liquidating
break.
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