Morning forex briefing

The USD is higher to start New York
after a two-sided overnight session that held the majors to tight ranges
Additional rhetoric from N. Korea may have helped fuel
the USD firmness but as expected, China has called for restraint and most
likely will keep the pressure on their neighbor which should moderate the
situation. Cross-spreaders are active on the Yen side of the non-USD crosses
and the default winner is the USD; the Yen weakness issue will likely be
discussed at the ECB press conference Thursday and traders are looking for
clues as to central bank actions to stem the Yen slide against EURO.

UK data released this morning showing slightly better than
expected PMI data gave cable a boost briefly but Asian offers late in the
European session capped the GBP under yesterday’s highs at 1.8890 high print.
EURO came under technical selling from Tuesday’s weak close and stops were
found as expected at the 1.2710 area quickly taking the rate lower to find
more stops at 1.2700 and 1.2690 before the slide was halted at the start of
New York trade. USD/JPY has led the complex higher with stops and reported
fresh buying above the 118.00 handle quickly absorbing offers from large
names; high print 118.29 still below Monday’s high.

USD bulls have taken the greenback to previous
support/resistance and most traders are saying “nothing new”. Volumes have
been moderate and largely small-money accounts active some desks are saying.
In my view, this is the pullback USD bears can exploit near-term. It is a
Wednesday with larger fundamentals due in the next 24 hours; should these USD
highs hold for the day and aggressive buying dries up after the London fix,
the USD will most likely weaken into the end of the week. Look for solid
two-way trade the rest of the day and a weaker close tomorrow for the USD.
Today’s action may be the best prices for the week to enter USD shorts.


R3: 1.2780

R2: 1.2730/40

R1: 1.2700

Current Price : 1.2676

S1: 1.2650

S2: 1.2620

S3: 1.2580

Pair rotating lower to bottom of consolidation range,
technical trade in play with close-in stops from small players likely the
drive lower; stops above the market for shorts are next so expect the rate to
rally through the end of the week. BUY EURO under the 1.2700 handle for a
trade; look for a new weekly high before Friday.


R3: 119.00

R2: 118.80

R1: 118.30/40

Current Price : 118.18

S1: 117.90

S2: 117.50

S3: 117.20

Pair finding strength on cross-spreading but unable to find
solid buying above the 118.00 area. Rate finding light stops mixed with
professional selling between 117.90 and 118.20 traders say, move over 118.30
would expose additional stops but studies are beginning to go overbought; look
for a pull back and close under 117.90 on the day. Close over 118.10 likely to
draw more buyers.

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