Morning Forex Briefing
After a two-way thinner market in Asia to start
this week the USD is firmer into the start of New York trading after
the much awaited G7 communiqué failed to inspire the markets very
much. Making no mention of Yen weakness, the G7 ministers kept their language very close to what was released at the last meeting several months ago leading traders to believe that perhaps the markets are in a position to let the Yen continue to fall against the world’s major pairs. Cross spreaders were seen in all Yen pairs overnight but thinner conditions due to the Japanese holiday may have contributed a bit to the two-way nature of early trade.
Across the board the USD is higher after starting weaker and technically the rates have not reached any new ground with the exception of the GBP making lows under the 1.9480 area as some light stops were triggered after the rate opened firmer then fell back suggesting that some early longs may have been bumped out. Low prints at 1.9436 may make some bulls nervous but bids enabled a fast rebound and argues for a firmer day. EURO also had a bit of a brief sell-off in sympathy with Cable but has remained well within established ranges from previous sessions; traders note that sovereign names were noted on the bid under the 1.2970 area where stops were tripped suggesting that the “buy the dip†strategy remains the preferred one for near-term. EURO continues to hold above technical support at 1.2930 area; today’s low print is 1.2940 in New York.
USD/JPY rallied briefly in a knee-jerk reaction to the G7 lack of rhetoric regarding Yen weakness for a high print of 122.12 before offers emerged. Traders note that offers are thick above the 122.20 are and include exporters, option defense, semi-official and official names suggesting that it will be very tough going for the USD to break into new highs. Traders note that the rally was on lighter volume and expect Tuesday’s action to be more realistic to the health of the pair near-term. US data tomorrow is likely to add to volatility near-term as will later data in the week. In my view, the lack of aggressive follow-through by the USD after the much anticipated G7 outcome suggests that traders are waiting on this weeks US data before settling on a course of action near-term for the USD. Should this week’s data disappoint, this USD strength of late may be a colossal “head fakeâ€.
Look for the USD to stay firm today with no follow-through on Tuesday. Look for the EURO to firm into mid-week.
EURO/USD Daily
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R3: 1.3080
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R2: 1.3050
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R1: 1.2990/1.3000
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Current Price : 1.2956
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S1: 1.2930
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S2: 1.2900
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S3: 1.2880
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Rate continues range bound between established upside around the 1.3050/60 area and the downside at 1.2880 area of recent channel formation. Rate is coiling in my view and dips should be bought for an eventual rally above the consolidation/congestion area. BUY EURO 1.2950/60 or better for the pull but expect possible pullback form the next rally into the top of the range; rate may range-trade longer.
USD/JPY Daily
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R3: 122.50
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R2: 122.20
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R1: 122.00
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Current Price : 121.97
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S1: 121.50
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S2: 121.00
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S3: 120.80
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Rate remains “toppy†above the 122.00 area and aggressive traders need to sell with both hands above the 121.80 area in my view. Rate likely to pull back and continue to consolidate between 119.80 and 122.00 providing a lot of short-term opportunity but look for the USD to eventually fall through to lower prices; shorts from 122.00 area may be the highs for the year.
Please see www. ProEdgeFX.com for details
Jason Jankovsky
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