Morning Forex Briefing

The USD is mixed to firmer in New York this morning as a degree of
follow-through buying was seen overnight from Friday’s strong payrolls data.
Although holiday trade slowed volumes and much of Europe remains closed traders are have a slight degree of demand for greenbacks this morning but signs that the near-term push is fading are evident. Traders saw early weakness in the majors as a buying opportunity most likely to cover shorts set late last week as the degree of follow-through on USD gains were less than spectacular. Technical levels have held in the majors and interest appears to be shifting to a “sell USD” mode slightly.

GBP has held support at the 1.9620/30 area after a brief shake-out from the 1.9660 area was seen on Friday but traders remind that volumes were light on the move and only light stops were seen on the move. Technical support is said to be very firm ahead of 1.9550 with option defense reported as well suggesting that the rate is probing for sellers and as yet not finding very many.

EURO had a slight selling effort overnight Europe but has rebounded back to the opening range with little interest on the move lower. Low prints at 1.3352 keep bullish hopes alive and traders are watching the potential option barrier at 1.3450 closely as that area appeared ready to fall Friday; “buy the dips” strategy very much in play this morning on EURO.

USD/JPY is firm on persistent interest in the Yen carry trade but traders note that almost no interest on the buy side over the 119.40 area appears to be capping the rate near-term. Stops are said to be building above the 119.50 area but offers remain thick ahead of there; potential exporter interest will likely get bigger as now the Japanese fiscal year is over. Adding a bit of uncertainty to the mix is the BOJ’s policy meeting set to conclude Tuesday. Analysts are not expecting any change in interest rates until after the July elections but early results over the weekend show that although all nine governors were reelected there still remains no clear leader between the two parties for elections later; analysts suggest this may delay the BOJ’s action until later. In my view, the USD is consolidating a bit before resuming the overall downtrend. Needless to say the USD/JPY pair will likely suffer from more volatility and may even remain counter-trend due to increased interest in the Yen carry but against the other majors I would look for a buying opportunity. Expect technical trade ahead of US data later.


R3: 1.3480

R2: 1.3450

R1: 1.3400

Current Price : 1.3375

S1: 1.3350

S2: 1.3320

S3: 1.3280

Pairs continues to hold a buoyant tone but upside may be limited ahead of the 1.3350 area of reported option defense; stops said to be thick above there with offers ahead of 1.3480 area. Downside likely to have bids resting layered ahead of 1.3280 area with stops below; any correction back to the 50 bar MA likely to be a strong buying signal. Look for continued consolidation ahead of Wednesday FOMC minutes.



R2: 119.80

R1: 119.40/50

Current Price : 119.28

S1: 118.80

S2: 118.00

S3: 117.60

Rate appears to have completed a 61.8% retracement of recent drop as no follow-through from Friday is seen today; stops above the 119.50 area layered with offers to 119.80 traders say. Fall back and close under the 100 bar MA likely to draw protective selling and stops also building under the 118.00 area; look for continued two-way trade with good volatility.

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