Morning forex briefing
The USD is trading better to start
New York after opening weaker in Asia and drifting lower into
European trade; comments from ECB governor Weber kept EURO better bid. Weber
said at a press conference overnight that the ECB has “sent a very clear
signal†that the bank intends to keep “highly vigilant†on the inflation
front; traders have kept the EURO well-bid suggesting that the probability of
a 25 BP rate hike at the October General Council meeting is significantly
higher now.
Most analysts are looking for at least one more rate hike
from the ECB but are divided on the timing for the move; should the bank raise
rates in October many analysts do not feel that the EURO has a 25 BP hike
fully factored into current pricing. EURO currently under a bit of downside
pressure but holding yesterday’s lows in subdued trade after a firm start
overnight. Cable is heavily pressured into the start of New York trade;
cross-spreaders liquidating appear to be the rule as the rate falls through
several layers of support for a low print at 1.8831 before finding reasonable
bids. Traders note that the break has been orderly and with good two-way flows
suggesting that the GBP has willing buyers on breaks and that long-term
traders may be accumulating additional long positions. Should the pair hold
the 1.8800 handle, many analysts would say that technically the pair has
corrected an overbought condition and likely washed out week longs setting the
stage for a further advance near-term. New 2006 highs are likely in Q4 I
believe but a correction is needed first and this week may provide that.
USD/JPY is firmer on the day as well trading back to 116.60
area where offers are said to be resting and stops are mixed in; high prints
at 116.71 contained the recent strength. No real news overnight Asia but the
BOJ starts their policy meeting today and analysts agree the chance of a rate
hike is almost zero; the bank is watching the CPI data very closely for some
inflationary pressure before making an additional move on the interest rate
front. In my view, this is a USD selling opportunity. I think the potential
for a USD sell-off from current pricing is quite good and traders will have a
lot of two-way trade to exploit as we head into the end of the week. Look for
the USD to remain well-bid today but start to slide off overnight as the
crosses have corrected nicely and spreaders will be back on the bid for the
EURO and the GBP soon.
USD/CHF Daily
R3: 1.2500
R2: 1.2450
R1: 1.2420
Current Price : 1.2380
S1: 1.2340
S2: 1.2310
S3: 1.2280
Pair respecting long-term potential down trend and slightly
higher than the down trending 100 bar MA suggesting the top of the current up
move. Look for the pair to retreat from this price area after a pullback
during the day leaves a tail on the candle for today. Test of 1.2200 likely as
the pair rotates lower continuing to sketch out large triangle pattern.
USD/JPY Daily
R3: 117.50
R2: 117.20
R1: 116.80
Current Price : 116.63
S1: 116.20
S2: 115.80
S3: 115.50
Pair making a “dead-cat bounce†from the break yesterday,
likely to close weaker on the day as 116.60 is said to hold offers mixed with
stops halting the retracement. 50 bar MA offering a bit of early support at
115.50 area but sellers are said to be willing above the 116.20 area and stops
are said to be sub 115.50 suggesting the pair has more downside waiting.
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