Morning Forex Briefing

The USD is sharply higher this morning after a panic-buying session during Asian trade caught USD shorts wrong-footed into European trade forcing a bout of long-liquidation across the board in the majors. Japanese CPI was mistakenly reported lower-than-expected by Reuters overnight and the early release of bad data created a rush of USD buying by panicky accounts forcing the pairs into stops. Once stops were triggered all the pairs fell back through important previous technical numbers and now analysts say “the damage is done”. Should that be the case, most traders will look to stay away for a few sessions until a better handle on price potential can be found.

Out this morning is US durable goods data and traders are not expecting the report to move the markets much seeing as the price action overnight basically did the work a better-than-expected report would have done for the most part; traders are looking to see a short-covering rally in the majors as traders square books ahead of the weekend and the end of the Davos conference. The big mover overnight was USD/JPY; traders note that stops over the 121.30 area were triggered hard on big volume but offers above the 121.50 area were exceptionally thick. Today marks the expiration of rumored 122.00 options in the USD/JPY so once that defense is no longer needed traders expect an attempt on the 122.00 handle but offers are said to remain huge at those levels so a short position above the 121.50 area is still viable in my view.

Cable fell through the remaining support areas ahead of technical numbers that should mark the end of the corrective sell-off from the 1.9900 area. Low print at 1.9584 makes a 50% retracement of the recent rally to the new 2007 highs so shorts will likely look to cover in here. EURO tracked GBP lower as usual but found support at previous 1.2890 area with large names seen on the bid. Traders report that across the board in most of the majors USD pairs that CTA-type and model/momentum accounts were all on the bid for USD overnight on the rally. If that is the case that marks three solid days of USD buying by the “black-box” crowd and they will likely cover ahead of the weekend; analysts note that further buying of USD ahead of a weekend is not likely due to the large number of big names on the offer recently. The larger sovereign and semi-official names are typically on a much longer timeframe so they will not likely cover their longs after having just set them this week.


R3: 1.9780

R2: 1.9700/20

R1: 1.9660

Current Price : 1.9600

S1: 1.9580

S2: 1.9550

S3: 1.9500/10

Pair completes
50% retracement from 1.9280 low to 1.9917 high; some short-covering to
be expected. For the week look for V/OI in futures to suggest that
this liquidating break is weakening and resumption of uptrend is
likely. Support at 50 bar MA likely to inspire additional buying if
stops are triggered close-in from early longs. Should this area hold a
retest of the highs likely.


R3: ?

R2: 122.00

R1: 1.2150/80

Current Price : 121.44

S1: 121.00

S2: 120.60

S3: 120.20

Pair violently rallies after good selling suggesting the bulls are not finished yet but offers ahead of previous numbers remain solid and pair was unable to score a high on panic buying while other pairs benefited. Potential top still forming and shorts over the 121.50 area still viable in my view. Look for retracement from these highs near-term.

Please see www. for details

Jason Jankovsky

Trading Futures, Options on Futures, and off-exchange Foreign Currency transactions involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. The information contained on this email does not constitute a solicitation to buy or sell by Infinity Futures, Inc., and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law.