Morning forex briefing

The USD gained some ground on
follow-through from Thursday’s trade
but opens New York mixed
against the majors in subdued trade. Volumes are not impressive and traders
note that much of the USD gains are stop driven with conspicuous names on the
offer to cap the rally. Overnight UK GDP data released unrevised at +0.8% Q/Q
but still showing the fastest growth in two years. GBP rallied on the news and
stops were elected on the move over the 1.8900 handle briefly ahead of New
York trade. EURO followed in sympathy after posting a low print at 1.2747,
effectively a double-bottom from Thursday but willing sellers at the 1.2780
area are absorbing bids to start New York. USD/JPY has been the best
performer, trading through the 117.00 handle and finding stops above 117.10
area for a high print at 117.30.

Traders note that CTA-type accounts had stops at 117.20 area
and sellers included exporters and a large Japanese bank during Asian trade.
Analysts note that all the majors have had a lower weak against the USD and
due to this being a Friday ahead of important US data next week, a bout of
short-covering could be in the works today as well as Monday. US Fed Chairman
Bernake is speaking in Colorado today and many traders expect some volatility
around his remarks but any USD rally is expected to be brief as the major
pairs are all at key support/resistance levels and open USD longs are likely
to liquidate into any rally. Traders note that real money accounts have been
seen on the offer for USD the past 24 hours suggesting that professional
traders are not looking for a strong USD into next week.

Technically, all the pairs have completed significant
retracements and are at levels that encouraged good USD selling previously. In
my view, today is the day to take profits on your USD longs and look to stand
aside; aggressive traders can sell the 117.20 area in USD/JPY for a break back
to test support at 116.30 area; a likely target if GDP or NFP next week are
seen as USD bearish near-term. I look for the USD to correct lower after a
good run higher this week but the resumption of USD downtrend needs a bit more
effort so I expect solid two-way trade today and early next week; look for the
USD to finish lower from the open today in New York but with gains on the

R3: 118.20

R2: 117.80

R1: 117.30

Current Price : 117.12

S1: 116.80

S2: 116.20/30

S3: 115.80

Pair reaching to resistance at the 117.20 area completing
target for longs, real money sellers on the approach to 117.00 traders say
with US investment banks on the bid; most likely late longs in there so look
for a retracement today. Close below 117.00 today leaves long selling wick on
the highs, more to follow through next week. Stops above 117.40/50 area
targets 117.80 but strong offers up there.


R3: 1.2850

R2: 1.2820

R1: 1.2780/90

Current Price : 1.2769

S1: 1.2740/50

S2: 1.2700

S3: 1.2680

Pair completes the 38.2% retracement and finds buyers at
1.2750 area. Offers at 1.2780 area contain pricing for now but traders note
that stops are close-in suggesting that sellers are small timeframe momentum
traders likely to cover quickly; volatility likely to increase around Bernake
comments today. Look for the EURO to rally above 1.2800 near-term and offers
to cap ahead of 1.2850/

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