Morning forex briefing
The USD looks poised to hold solid
gains on the week as sellers continue to emerge in the majors.
Although much of the recent action has centered on the Non-USD crosses,
outright USD buys have been seen the last 24 hours; most notably a US
investment house on the offer for a full yard of Cable during the European
session. Triggering stops at 1.8780, 1.8730/40 and 1.8700, GBP continued to
fall overnight into lows just ahead of the US session at 1.8665 before bids
supported the rate. Technical selling remains as the pair has given back all
the gains the past several sessions from the rally early in September from the
1.8500 handle.
Some analysts are suggesting a potential range in the pair
may develop but cable has a full handle lower to go to establish a
consolidation range between roughly 1.8550 and 1.9050 areas. USD/JPY has
scored the top of the most recent range once again lifting to 118.20 area in
stop-driven trade but option defense and exporter selling again coming to the
table above the 118.00 figure. Rumors of potential developments in China gave
the USD bulls a scare last night initially driving USD/JPY back to 117.70 but
once the rumors of a potential Yuan reval of some kind were dispelled the pair
returned quickly to the 118.00 area; currently a bit lower to start New York.
EURO remains on the defensive as well but is holding the
previous support area of 1.2650/60 area in solid two-way trade. Technicians
note a head-and-shoulders pattern on the hourly studies has been violated
projecting a measured move to the low 1.2500 handle but I think that scenario
is less likely ahead of upcoming ECB general council meeting next week. Some
forecasters are predicting two more rate hikes by the ECB before the end of
the year and those have not been factored into current EURO pricing I believe.
In my view, the USD has provided a tremendous short-selling opportunity to end
this week. USD strength is more by default than by design in my view;
cross-spreading for non-USD pairs has given a slight lift to the Greenback and
this rally is not strong enough to hold I think. Look to sell USD on rallies.
USD/CHF Daily
R3: 1.2620
R2: 1.2580
R1: 1.2550
Current Price : 1.2536
S1: 1.2500
S2: 1.2460/80
S3: 1.2420
Pair looking for a top in here I think, currently has fallen
back from this area several times suggesting this is a return to the top of
the range and will be followed by a rotation lower. Aggressive traders can
take a short position here; run a wide stop against potential intraday
volatility. Rise in gold prices may help USD to weaken, watch for a long wick
on today’s action.
USD/JPY Daily
R3: 118.80
R2: 118.50
R1: 118.20
Current Price : 117.92
S1: 117.50
S2: 117.20
S3: 116.80
Pair all the way back to the top of the six-month long
resistance area; potential pennant forming for an upside breakout (?). I think
that is unlikely to hold so a rally through to the upside could be a huge
head-fake. Multi-year trend lines come in around the 118.30 area so expect
some long-term traders to offer the pair above the 118.00 handle. This could
be a huge short I think.
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