Morning forex briefing

The USD is starting this week two
sided in quiet trade;
slightly weaker to start New York after
remaining basically unchanged through Asia but weakening late in European
trade. Most traders cite cross-spreading with EURO/JPY leading and general
lack of follow-through ahead of US data this week. Analysts are watching
Wednesday’s GDP number closely according to most desks; recent inflation data
and import/export data point to a firm GDP number with maybe a bit higher than
the 3.2% number. Consensus is still for moderate 3.0% growth but traders are
bracing for a few surprises this week and last weeks rally by the USD may have
been a bit more than just short-covering.

Traders note that the CFTC COT report showed a drop in
speculative longs for EURO but an increase in Spec Shorts for Yen. No doubt
many of the poorly set longs in EURO and GBP were shaken out on last weeks
break into key support but certainly some aggressive buyers stepped in at
those levels; USD/JPY has backed off the 117.20 area but aggressive selling
has not appeared as yet today traders say suggesting that the pair may be
consolidating gains before a run at the 117.80 area where large stops may be
resting. With the lack of market-driving news until mid-week analysts remind
that light economic data due out before Wednesday may create solid two-way
trade with the USD covering a lot of the same ground twice. NFP on Friday will
likely cement the tone for the weeks’ trade so should the USD continue to
rally early; look for a solid close on the week over Key resistance. In USD/JPY,
a close over 117.80 argues for additional move higher but expect 118.20 to be
thick with offers.

Overnight, Cable tracked EURO higher and offers were seen on
the move over the 1.8900 handle but conditions were thin trader’s say. Offers
above 1.8960 area said to be larger in GBP. EURO saw close in stops elected
around the 1.2780 area of previous support likely clearing out poorly set
shorts from Friday, traders expect any rally to cap between 1.2830/50 area
offering great near-term potential for shorts. In my view, Monday is “business
as usual”. Look to sell previous resistance broken last week or buy support;
USD likely to consolidate near-term.


R3: 1.9050

R2: 1.8990/1.9020

R1: 1.8960

Current Price : 1.8954

S1: 1.8900/1.8880

S2: 1.8820

S3: 1.8780

Pair continues to range-trade into this week, upside capped
around the 1.8950 area or a bit higher, downside supported around the 1.8780
area; lot’s of two-way trade likely until a break of support to flush weak
longs. Look for US data to inspire a round of long-liquidation; stops said to
be thick under the 1.8750 area or slightly lower. Long-term traders likely to
buy sharp breaks so volatility will be high.


R3: 118.20

R2: 117.80

R1: 117.30/40

Current Price : 117.03

S1: 116.80

S2: 116.20

S3: 116.00

Pair likely to fall back from resistance area again,
aggressive sellers have gotten a lead from here more than a few times. 50 bar
MA likely to offer support on a break but that number is below near-term
support at 116.00 area; a test of 115.80 or slightly lower a strong buy in my
view. If US data disappoints the bulls, a drop to the range bottom possible.
100 bar MA also STRONG buy.

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