Morning forex briefing
The USD has started the week on a
softer note overnight, giving back a large portion of the previous
week’s gains but still trading on the offensive traders say. Although the
major pairs have all advanced against the greenback ahead of the New York open
this morning, trader’s note that technical levels are being tested and finding
good supply on the move higher. CFTC COT data shows that the market remains
heavily long both EURO and GBP futures and heavily short JPY futures.
Analysts note that technical levels traded overnight and
this morning are established levels of support/resistance and expect solid two
way trade to develop early this week; the economic calendar remains very light
this week and many desks are reporting that staff are still on vacation. The
“summer doldrums†may still explain lighter trading volumes but price action
is still within established areas suggesting that volatility will remain as is
and technical trade will dominate near-term. Overnight saw the USD/JPY pair
trade down from Friday’s close on concerns the China will continue to reval
the Yuan; USD/CHY closed at a new record high this morning. USD/JPY saw stops
triggered on the move under 115.50 area but rebounded into European trade.
Traders note that system accounts and model funds had stops placed in the
115.45 area and once those stops were cleared the market was able to rebound;
good importer demand also noted on the lows.
EURO rallied back to test the top end of the current trading
range where stops over 1.2880 area triggered a fast move to the high at 1.2907
before sovereign name selling saw the rally capped. Cable also rallied but a
bit less convincingly following EURO higher but finding good supply above the
1.8900 handle; the rally capped at 1.8972 and dropped back after close-in
stops were triggered. In my view, the USD sell-off overnight is simply
technical in nature and lacking any fundamental reason for traders to
re-position themselves. Short-term traders are likely to be the net force
currently active and support/resistance levels should offer good short-term
opportunity. Look for two-way trade and a rotation higher for the USD the next
24 hours.
GBP/USD Daily
R3: 1.9100
R2: 1.9040/50
R1: 1.8960/80
Current Price : 1.8939
S1: 1.8900
S2: 1.8870/80
S3: 1.8800/10
Pair rallies in sympathy with EURO overnight but continues
to respect technical resistance above the 1.8950 area. Look for a failure at
this high and a rotation lower to end the week. Record long positions remain
at the IMM and weak hands need to be cleared before the market can try for a
new high in my view. Stops remain under 1.8800 area, a close back below 1.8900
argues for a failed rally.
USD/JPY Daily
R3: 116.80
R2: 116.30
R1: 115.90/116.00
Current Price : 115.71
S1: 115.30/40
S2: 115.00
S3: 114.80
Pair continues to respect support at 50 bar MA and
attracting importer demand on pullbacks. Support at 115.20/40 area remains
solid and a close back above the 116.00 area argues for a test of resistance
at 116.80 area.
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