Morning forex briefing
The USD is trading mixed against
the major pairs as the first full day of trading after the US holiday gets
underway in New York; lower against the Yen and two-sided against
the GBP and the EURO. Traders note that not much real news is scheduled from
the US this week and the focus appears to be more on Non-US fundamentals and
technicals today. Overnight comments from ECB Bini-Smaghi were seen as
slightly bullish for EURO; the board member said that the ECB will continue to
tighten monetary policy if Eurozone growth and inflation forecasts come in as
targeted. Traders took this to mean that the ECB has more than a 90-day
horizon for potential rate hikes; some suggesting that the bank could raise
rates every quarter through out another year but most traders see the
potential for larger hikes less often as the bank’s likely solution.
EURO trading very two-sided in thinner trade to start
Tuesday at the 1.2830 area. Cable has failed to trade over the 1.9090 area
again after a brief rally in sympathy with EURO took the pair to an overnight
holiday traded high of 1.9071 on Monday; traders say the un-winding of GBP/JPY
crosses and the general strength in Yen helped cap the rally overnight again
Tuesday; analysts suggest that the GBP is topping again but near-term studies
show oversold readings. Model accounts are most likely still long both the GBP
and the EURO and stops for these accounts are sub 1.2820 in EURO and under
1.8950 in Cable traders say. On the buy side of both pairs are middle-eastern
names and rumors of semi-official demand.
USD/JPY is the weakest performer to start the
holiday-shortened week; falling to a low print of 115.55 before importers were
seen on the bid. The BOJ starts a policy meeting later in the week and the
bank is not expected to raise interest rates anytime soon; traders are
watching the CPI number for Japan closely and that is due out later in the
month. In my view, it’s simply business as usual after a holiday weekend;
traders will be back from their summer vacations now and books will need to be
adjusted as we finish out the last quarter of the year. Look for volumes to
pick up considerable in the next 60 days and for the USD to come under net
selling pressure. The potential for a correction in the majors is still
growing so be nimble from the USD short side the next few weeks.
EURO/USD Daily
R3: 1.2920
R2: 1.2900
R1: 1.2860
Current Price : 1.2810
S1: 1.2800
S2: 1.2760
S3: 1.2720
Pair looking to make a brief show at support around the
1.2790/1.2800 area but expect quality bids in that area. Stops said to be
building close-in around the 1.2820 area and those may have been triggered
just ahead of the 8:00 AM hour in New York. Close above the 1.2880 area opens
the door for 1.2820 but failure at 1.2760 area likely will lead to a rout and
test of key support at 1.2620 again.
USD/JPY Daily
R3: 117.20
R2: 116.80
R1: 116.20
Current Price : 115.88
S1: 115.60
S2: 115.20
S3: 114.80
Pair likely to find some support from 50 bar MA today but a
test of the 100 bar MA area at 114.80 likely to draw better support so I see
downside limited after Monday’s break. Longer-term studies are bearish so best
play is to sell rallies. Close under 115.80 area likely to set up test of
114.80 only because momentum players likely to get pulled in on a sharp break.
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