Morning Forex Briefing

The USD is firmer to start New York after a rally in late European trading was sparked by the BOE rate announcement. Leaving rates unchanged as expected, traders feel more confident that the BOE is done lifting interest rates near-term but are leaving the door open for rate changes when reviewing the BOE MPC minutes for this meeting.

Traders are waiting on ECB chairman Trichet to speak later today after the ECB rate announcement in a few moments. Analysts are of the opinion that if Trichet uses the word “vigilant” in the press conference then he is signaling a rate hike of at least 25 BP at the March general council meeting. Traders have had little to focus on this week besides rhetoric and speculation so the USD has remained very two-sided and technical trading has dominated.

GBP has fallen back from the high print of 1.9731 to trade back at the 50 bar MA around the 1.9580/1.9600 area where good bids are resting traders say. Stops elected at the 1.9650 area fueled most of the move suggesting that longs are attempting to take control of the rate for a push into new 2007 highs; most likely that will take some time. EURO is also trading lower on GBP sympathy, low print at 1.2975 into a zone of reported bids. Strong bids said to be resting at 1.2950 also so should EURO see additional selling a bounce would be likely in my view.

USD/JPY has rallied into offers above the 121.20 area; stops said to be layered 121.20 to 121.40 area; high prints currently 121.46 in early New York trade. In my view, the USD is rotating into resistance ahead of the G7 meeting on technical factors. Speculation that the G7 won’t mention the Yen in any way in their communiqué Saturday afternoon has fueled carry trade action and comments that the BOJ is in “no hurry” to raise rates has also driven traders to sell Yen across the board. All things being equal, if the USD remains technical in nature to finish the week, any surprises will most likely de-rail this late week rally in my view. Regardless of how you slice it, there has been nothing but as expected news this week. A close in the middle of the weeks range would not be unexpected and that is below today’s pricing. Look for the USD to give back some of these gains ahead of Friday’s close.

R3: 1.9720

R2: 1.9680

R1: 1.9650

Current Price : 1.9595

S1: 1.9580

S2: 1.9550

S3: 1.9500/10

Rate pulls back in technical trade as traders react to the BOE announcement, no real damage done to the bull side as of yet and holding the 50 bar MA is crucial for the week. Look for a bounce from the 1.9600 area for the week as traders contain the rate in technical trade between established S/R. OK to buy under 1.9600.


R3: 122.00

R2: 121.80

R1: 121.50

Current Price : 121.35

S1: 121.00

S2: 120.80

S3: 120.50

Stops elected above the 121.00 area and into the highs above 121.30 where offers were waiting. Pair now looking for additional buyers to lift into next level of resistance at 121.50/60 area but without a strong reason the move may be over for the week. Expect a pull back before Friday. Shorts over 121.50 are still valid with anything over 122.00 still ideal for a short play in my view.

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Jason Jankovsky

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