Morning Forex Briefing

The USD is on the defensive overnight as the major pairs continue to correct higher; USD/JPY is firmer as traders continue to debate the recent need for unwinding of Yen carry trades. Initially firm in Asia the USD began to slide off a bit as technical traders built on the strength seen in Tuesday’s late New York action. Triggering close in stops the GBP and EURO both cleared first level tech resistance for high prints into European trade at 1.9362 and 1.3141 respectively.

As expected, two-way trade developed and the majors fell back to previous technical support on aggressive selling by a New York bank and others traders say. Semi-official Asian names were seen on the bid for cable traders say and support was seen at 1.9265 area after a modest correction. EURO also under a small amount of pressure from the highs in sympathy but so far into early New York is holding firm above the 1.3120 area of previous resistance. The major interest remains the Yen crosses and demand for Sterling-Yen is behind the overall support of the GBP this morning analysts remind suggesting that the past several days of JPY carry unwinds is being used by aggressive and professional traders to re-set their carry trades. Regardless of near-term liquidation pressures analysts remind that the fact is interest rate differentials between the JPY and other high-yielding currencies still make the carry attractive and the Japanese economy has a long way to go before the argument for a sustained rally in the JPY can be made.

USD/JPY remains under bid pressure this morning after scoring an overnight high at 116.91 before seeing some selling pressure. Analysts agree that a modest correction after a six-handle sell-off is a reasonable assumption but caution that close-in stops may not be enough to spark a serious rally. Traders remind that two-way action will likely be the case through the end of the week until US data is released on Friday morning. Balance of Trade and Non-Farm Payrolls are forecast to be USD-neutral so pending any surprises a USD short-covering rally is likely given the lack of USD follow-through to the downside this week. Aggressive traders can ADD to their GBP and EURO longs in my view.


R3: 1.3200

R2: 1.3180

R1: 1.3140/50

Current Price : 1.3136

S1: 1.3110/20

S2: 1.3080

S3: 1.3050/60

Potential double bottom on the weekly action at established lows in the 1.3080 area, look for two-way action to remain in play through Friday’s US data. Aggressive traders can ADD to open longs on a pull back to the 1.3120 area near term, expect solid support at the 50 bar MA should close in stops be under the 1.3080 area. Stops said to be resting above the 1.3180 area.


R3: 117.80

R2: 117.40

R1: 116.90/117.00

Current Price : 116.29

S1: 115.80

S2: 115.50

S3: 115.20

Pair encountering potential resistance from fib defense at the 38.6% previous support level on the yearly retracement numbers. Stops likely layered above the 117.20 area along with offers. Bids back at 115.80 area and below traders say. Aggressive traders can ADD to open longs for the potential correction as it develops at 116.20 or better.

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