Morning Forex Briefing

The USD is trading weaker to start
New York this morning after overnight pressure erased the gains shown on
Across the board the Greenback is weaker with the
largest decline against the GBP; traders remind that aside from cable the USD
is range bound and is due for an upside correction. Technical traders were
seen on the bid for USD/JPY early in the Asian session attempting to trigger
stops said to be resting above the 116.50 area but volumes were not heavy on
the rise through the overnight highs at 116.57 where only light stops were
seen; the pair falling back but still firm at 116.20 area below the Wednesday
New York closing area suggesting a two-sided day will be in store for the USD/JPY.

Cable rallied to a new 2006 high during the European
session; traders say the GBP got a lift from good housing numbers released in
the UK. Comments from BOE officials at the Treasury Committee meeting also
underpinned GBP as they were seen as more “hawkish”; BOE King reiterated that
the Central Bank is committed to fighting inflation and traders saw that as
bullish for the pound. Rising through the 1.9550 area to find a reported
option barrier at the 1.9600 handle cable stalled at the 1.9580 area amid
offers from official names. Traders report that semi-official and sovereign
names seen on the approach to the highs. EURO also tracked cable higher but
was unable to score a new high overnight; high prints at 1.3212 just under the
weekly high.

Traders note that momentum funds and spec accounts were seen
buying both EURO and cable during the European session. With the release of
today’s US data and a light calendar tomorrow for US data analysts suggest
that the USD may have done all it’s going to do for the near-term as most of
the positive news is being discounted and technical factors may prompt a
short-covering rally. In my view, the USD has over-extended its decline
near-term; I would be looking for a top in GBP and EURO at current pricing. A
decline of several handles to correct any overbought conditions would make for
reasonable trading in my view; look for the USD to rally into Friday.


R3: ?

R2: 1.9600

R1: 1.9580

Current Price : 1.9563

S1: 1.9510

S2: 1.9450/60

S3: 1.9380

Pair advancing on lighter volumes and close-in stops, option
barrier reported at 1.9600 drawing protective selling ahead capping the rate
at 1.9580 area; momentum accounts active on the bid suggesting that the rate
is topping. Bids seen at 1.9510 area, stops below; offers layered to 1.9600
and 1.9615 area traders say, stops above.


R3: ?

R2: 1.3250

R1: 1.3220

Current Price : 1.3203

S1: 1.3150

S2: 1.3100

S3: 1.3050

Pair inside range day with most higher action in sympathy
with GBP in my view, traders note official names on the offer suggesting the
rate may have advanced a bit too far for some. Fall back to test the upside
breakout puts a correction back to the 1.2900 handle offering good short
potential. SELL above 1.3200 looking for a pullback to top of previous range.

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