Morning forex briefing
The USD continued to consolidate
losses overnight, as continued two-way trade pressured the major
pairs to both sides of unchanged. Continued follow-through selling from
Wednesday’s US CPI data was seen in early Asia but the Greenback saw only
narrow trading ranges initially. An article in the Asian edition of the
Financial Times suggested that Japanese investors may be pulling out of USD-denominated
assets prompted a flurry of USD/JPY selling but technical support levels at
the 115.20 area held firm into European trade; traders say that stops under
the 115.50 area accelerated the move but bids absorbed those offers suggesting
that the pair has reached firm support.
Analysts note that 114.80 is very strong support in USD/JPY
and look for any test of that area to be bought heavily. EURO gained a bit of
support from the weakness in USD/JPY during European trade holding the 1.2860
area from yesterday’s highs until a brief rush of buying on the news that the
German Banking Association raised it’s EMU GDP forecast from 1.75% to 2.0%
caused a pop over Wednesday’s highs; strong offers countered the light stops
and analysts note good offers are layered up to the 1.2900 handle.
Additionally, traders note that CTA and system accounts were buyers of EURO
overnight. Cable has held to inside weekly ranges again overnight and opens
New York firmer but well off overnight highs.
Cross-spreading still remains evident and traders suggest
that technically the GBP is forming a near-term top as some studies are
showing bearish divergence and overbought readings. In my view, the USD is
range trading with good potential for a rotation higher to end the week. All
the pairs have seen volumes drop off on their rally higher the past two days,
technical support/resistance areas are drawing in traders to contain price
action in solid two-way trade. Note that CTA and System Traders have been
active on the buy side near the high prints suggest that the momentum play for
further upside follow-through will be expected the next 24 hours. If no
follow-through, those longs will bail on their positions by Friday. I think
the USD has fallen to the weekly low and the short-covering rally to end the
week is likely. Look for reversals across the board today and the USD to
finish higher on the day.
GBP/USD Daily
R3: 1.9050
R2: 1.9010
R1: 1.8990
Current Price : 1.8964
S1: 1.8920
S2: 1.8880
S3: 1.8820
Pair continues to consolidate pullback from 2006 highs,
traders note that volumes are lighter on the move higher from last weeks lows
suggesting that buying interest is drying up. On the “bearish†USD news this
week this pair has managed to move a total of 80 points higher net; not a
solid amount of buying in my view. Tech resistance is solid at 1.9010 area,
look for a sell-off to finish the week.
EURO/USD Daily
R3: 1.2980
R2: 1.2950
R1: 1.2920
Current Price : 1.2875
S1: 1.2820
S2: 1.2780
S3: 1.2740
Pair back to the near-term resistance area of just under the
1.2900 handle, strong offers reported layered between 1.2880 and 1.2920
expected to cap this weekly strength. Look for a pull back and a reversal late
this week or early next week as market remains heavily long. CTA type accounts
on the bid overnight are a great clue that a reversal is in the works.
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