Morning Forex Briefing

The USD starts the week mixed as general technical trade and follow-through activity create a solid two-way overnight session with the USD about unchanged to firmer at the start of New York trade. Currently near the highs in quiet trade the greenback has followed through on recent strength into the start of trading but analysts note that the USD is running in overbought territory; most notably against the Yen. Cross-spreading for Yen was the theme in early Asian trade overnight and the USD may be higher by default rather than on interest from the long side of the pair.

Currently USD/JPY is at 121.70 area above stops triggered on a brief rally into the 121.50 area but volumes are light. Traders note that on every new high the same names are visible on the offer; most notably exporters. Traders expect option defense at 121.80 and 122.00 areas of resistance and remind that the rate is showing overbought readings. Aggressive traders may have a solid short opportunity above the 121.50 area in USD/JPY.

Cable is firm but off the overnight highs to start US trade, analysts note that GBP is near previous resistance and has attracted sellers in the 1.9770 area several times lately. Should the rate fail to trade the 1.9800 handle early in the week a technical sell-off may result. Cross-spreaders for Yen gave GBP a boost in Asian trade and traders expect the sterling/yen cross to remain firm holding GBP/USD firm as well. EURO remains range-bound in early New York also, analysts suggest that solid German PPI data today may keep EURO under pressure a bit as inflation seems in check in the Euro-zone’s biggest economy; forecast to grow by +0.1% German PPI was flat at +0.0%. EURO is holding support at the 1.2930 area in lighter trade. CFTC COT data showed a slight drop in open EURO long futures positions but that was for data slightly ahead of the break lower so to start the week the EURO may have cleared stale longs and formed a base for higher prices near-term.

Data for USD/JPY showed a record short Yen futures position ahead of current low prices in futures suggesting the late short is finally in; traders expect a short-covering rally in Yen futures near-term. In my view, the USD strength should be exploited from the sell side. I wouldn’t look to buy a pullback in the USD but rather look for a USD top to form in the current pricing for the majors. Economic data is light this week and the USD bulls have little to work with until late this week.


R3: 1.9820

R2: 1.9800

R1: 1.9780

Current Price : 1.9747

S1: 1.9720

S2: 1.9680

S3: 1.9640

Rate finding early resistance on approach to 1.9780 area with more selling expected at 1.9800 area. Traders note the pair has a technical resistance area between 1.9780 and 1.9820 so likely it will be slow going with lot’s of two-way trade in that area. Stops building below 1.9660 area traders say suggesting that a pullback likely should the 1.9800 handle fail to trade early this week.


R3: ?

R2: 122.00

R1: 121.80

Current Price : 121.75

S1: 121.20/30

S2: 121.00

S3: 120.60/70

Rate approaching a two-year high on lighter volumes, CFTC data showing a record long-USD position in futures suggesting the rate is overbought near-term. Option defense said to be heavy at 121.80 and 122.00 areas. Look for a pullback to first Fib defense at 120.00 area if sellers cap the rally below 121.80; stops said to be over 122.00 area.

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Jason Jankovsky

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