Morning Forex Briefing

As expected, the USD
remained in solid two way trade in Asia getting a bit of a boost from the BOJ
rate announcement.
The BOJ kept rates “as is” in a widely expected
move and analysts are now looking forward to targeting the February meeting at
the latest for a 25 BP rate hike. Announced overnight were estimates for the
2007 GDP outlook for Japan and analysts are looking for a 2.0% growth rate for
the year, up from earlier estimates adding fuel to the fire that the BOJ will
move aggressively to keep inflation in check.

USD/JPY fell on the news but quickly recovered
and remained in a tight 50 pip range until the open in New York. Real money
accounts and exporters were seen at the highs traders say and stop still
remain in place above the 118.40 area. Bids reported back at 117.80 and with
holiday trade in full swing traders expect the USD/JPY to remain somewhere
between the 117.60 and 118.40 area through the end of the week. EURO has
rallied in European trade hitting close in stops above the 1.3120 area drawing
short covering as well; German IFO sentiment was released better-than-expected
at 108.7 indicating good confidence in Eurozone growth near-term. EURO hit a
high print at 1.3177 effectively creating a near-term bottom at technical
support at the 1.3050 area. Thin conditions and holiday trade remain of course
and traders look for continued choppy trade to end the week as big players
begin to wind down operations ahead of the weekend.

Cable rallied in sympathy with EURO and on the
unwinding of cross spreading hitting an overnight high at 1.9656 before
dropping back a bit on near-term profit taking. Traders note that the GBP has
remained above key rising support at 1.9450 area but caution that the 1.9800
area will be a very tough area of offers and holiday trade will make that very
difficult to penetrate; analysts look for the GBP to stall in the 1.9700 area
of range-top. Today’s data includes two closely watched fundamentals and
expect it to be a mixed bag for the USD. PPI will undoubtedly show inflation
moderating and benign but Housing starts should reflect a slowdown. Between
the two expect the USD to remain violent and two-sided. Look for the USD to
cover a lot of the same ground twice.


R3: 118.80

R2: 118.60

R1: 118.30/40

Current Price : 118.06

S1: 117.80

S2: 117.40/50

S3: 117.00

Lot’s of upside resistance coming in the rate
and exporters active into the overnight highs suggesting that the pair is
finding solid resistance in the 118.20 area of previous highs. Fallback below
the 50 bar MA would argue for a near term top but potential inverted head and
shoulders pattern may form the next few days. Close below the 100 bar MA
needed to help the bears, above the 118.40 area to help the bulls. Look for
continued two-way trade.


R3: 1.3250/60

R2: 1.3220

R1: 1.3180

Current Price : 1.3162

S1: 1.3120/30

S2: 1.3100

S3: 1.2080

Rotating higher in thin trade gives the rally a
suspect feel but stops close in suggest the bears are less confident into the
end of year. Any bear had to have known he was executing into potential
holiday trade and most professionals have been long so I would argue the pair
will fall back after the books are squared; look for support to hold on a dip
to 1.3080.

Trading Futures, Options on Futures, and
off-exchange Foreign Currency transactions involves substantial risk of loss
and may not be suitable for all investors. You should carefully consider
whether trading is suitable for you in light of your circumstances, knowledge,
and financial resources. You may lose all or more of your initial investment.
Opinions, market data, and recommendations are subject to change at any time.
The information contained on this email does not constitute a solicitation to
buy or sell by Infinity Futures, Inc., and/or its affiliates, and is not to be
available to individuals in a jurisdiction where such availability would be
contrary to local regulation or law.