Morning forex briefing

The USD is trading softer this
morning after a moderately busy overnight session,
Cable rallying
the farthest in late European trade as UK GDP numbers encourage GBP bulls.
Cross-spreaders noted for Yen again overnight linked to USD buys but strong
offers at the 118.40 area capped the upside in the USD/JPY pair. Traders note
that with the last 24 hours of USD weakness there has been a subtle shift in
sentiment for the Greenback near-term. Most analysts are looking for a
stronger USD but failure at technical levels suggests that the USD is ripe for
a pullback.

Traders note that stops are building on the sell-side of the
pairs which appear to be liquidation orders suggesting that most market
players want to lock open long profits in case the USD should fall ahead of
the weekend. Technical trade usually results in solid two-way action and that
is exactly what the USD saw overnight so a long-liquidation break based on
technical failure is not an unreasonable point-of-view for today’s action.
Near-term the majors are trading at or higher than the monthly opening range
suggesting that the USD will weaken into the end of the month as prices rally
through the October opening range. In my view, the major pairs are set to hold
firm to higher for the day and look for solid two-way trade during the next 72
hours. Should stops under the USD fire off the potential for a sharp break in
the USD is higher of course but it is more likely that an orderly ebb and flow
between both sides will create a solid rise and fall during next week that
will provide short term traders a lot of opportunity and longer-term traders
places to add for the developing trend back to the top of the major’s recent

In my view, the data due from the US next week will not
encourage the USD bulls. FOMC rate announcement likely to be a no change vote
with a statement reflecting what’s been said already. Durable Goods likely to
show an increase as the economy is still expanding moderately and GDP will be
lower as trade deficit and inflation shave a few points from estimates. Look
for the USD to remain two-sided but under pressure today.


R3: 119.20

R2: 118.80

R1: 118.50

Current Price : 118.29

S1: 118.00

S2: 117.50

S3: 116.80

Potential top in place as prices drop to within striking
distance of the monthly opening range, stops said to be very large in the
117.90 area layered to 117.50 but bids also said layered in. Two-way trade
likely but with a weaker undertone, sell rallies to existing tech resistance.
Close under 118.00 likely to accelerate active selling, close back over 118.50
likely to attract late buying.


R3: 1.8950

R2: 1.8910/20

R1: 1.8880

Current Price : 1.8842

S1: 1.8800/10

S2: 1.8750

S3: 1.8700

Strong buying by rumored Asian and sovereign names after UK
GDP data, rate crosses 50 bar MA negating selling pressure, close over the
1.8850 area will likely draw technical buying and model/momentum accounts.
Risk of a pullback to 1.8750 area but that is still a strong buy in my view.
Stops rumored to be above the 1.8880 area of previous support.

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