Morning forex briefing
The USD opened firm to mixed overnight Asia today before firming up into European trade. The major pairs saw technically-inspired trade to start European trade as US investment names were seen on the bid for USD/JPY, triggering light close-in stops above the 118.80 area. Offers were seen all the way up from 118.70 through 119.20 from Eastern European Sovereign names after the Tokyo fix suggesting that real-money demand for Yen remains.
Last week the Russian Central Bank announced that it will be adding Yen to its mix of FOREX reserves so potentially banks seen today were acting on the Russian’s behalf. Traders note that model accounts were on the bid for USD/JPY in Europe and may be opening new positions. Cable has fallen back to support at the 1.8720 area after solid stops were triggered on the break from 1.8830 area, technical support was at 1.8800, 1.8750, and 1.8730 with real money accounts on the bid while stops and offers were seen from US names.
EURO followed GBP lower in sympathy and is holding support at the 1.2550 area; low print 1.2543 ahead of New York trade. Analysts note that EURO is holding off key support at the 1.2500 area and should that hold after the FOMC meeting this week then potentially a bounce to the 1.2700 handle is coming as shorts will have lost momentum at that point. Most market analysts are looking for the Fed to leave rates on hold this week but nervousness ahead of the meeting may cause traders to stand aside until after the rate announcement.
Speaking in Europe this week are members of the ECB and known hawk Trichet is expected to reiterate that the ECB is likely to raise rates at the December General Council meeting. Considering that the ECB is hiking rates and the US Fed has paused, short players in the EURO may be a bit concerned that the Bulls will get a firm hold over the 1.2600 handle soon and are likely to stand aside if the wording from the Fed statement hints at all that the Fed is more dovish. Look for general two-sided trade ahead of Wednesday and volatility during the announcement. Aggressive traders could be buyers of the Majors at current levels.
GBP/USD Daily
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R3:
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R2:
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R1:
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Current Price : 1.8722
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S1:
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S2:
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S3: 1.8620
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Pair backing off highs seen late last week but still holding net advance from the lows seen two weeks ago. Support at 100 bar MA expected to be solid but traders note bids ahead of there. Stops seen overnight were light and most likely late longs caught wrong-footed. Aggressive traders can buy this dip or a bit lower if possible, close back over the 1.8800 area keeps bullish momentum in play I think.
USD/CHF Daily
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R3:
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R2:
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R1:
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Current Price : 1.2664
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S1:
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S2:
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S3: 1.2580
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Pair re-testing breakdown from resistance area around 1.2660 to 1.2720, stops noted on the break lower suggesting some longs were wrong-footed at the end of the week. Model accounts noted in USD/JPY and most likely in CHF on the bid as the pairs rallied but traders note real money accounts on the offer. Aggressive traders could sell between 1.2680 and 1.2720 today on further strength. Close over 1.2700 may encourage bulls.
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Jason Alan
Jankovsky
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