Morning forex briefing
The USD is mixed to start New York
after a solid night of losses; USD/JPY initially weaker on
better-than-expected Japan GDP data. The modest upward revision in Japanese
GDP data, +0.2% Q/Q, was enough to spark a mild USD/JPY sell-off in moderate
volume but the pair quickly recovered as cross-spreaders continued to be
active on the EURO/JPY and the GBP/JPY crosses. Exporters were noted on the
offer at 117.05 before the initial retreat but bids from a US investment bank
halted the decline and help to life the rate back to the 117.00 handle.
Speculation that this week’s G-7 summit and the potential for discussion
regarding Asian currencies are keeping a firm tone in the USD/JPY.
Cable has had a violent two-sided night as cross-spreaders
remain active on that side of the pair as well, initially seeing a bit of
weakness on sympathy with EURO weakness in the crosses early, the GBP traded
to a low print of 1.8636 before rallying back on short-covering and GBP/JPY
strength; high print to start New York is still the overnight high at 1.8708.
Euro has traded to a solid potential double-bottom overnight, weaker at the
start of Asia to post a low print at 1.2647 only a pip or two under Friday’s
low but found solid bids resting at the 1.2650 area and the rate recovered to
post a European high at 1.2740 before offers were found. In all three majors
overnight, traders say that caution is urged ahead of the G-7 summit next
weekend.
Good fundamentals are due this week from the US but even
with USD-negative data traders do not expect the pairs to move outside of
established ranges for the week. That still leaves some solid two-way
potential for aggressive traders and I would be a buyer of the pairs on any
weakness. A rotation higher would be very likely given the speed and distance
of last weeks’ sell-off which appeared largely corrective in nature. IMM data
released on Friday and CFTC COT data also both point to the potential for a
drop in outright open long positions in Cable and EURO; and a drop in Yen
short positions. This would indicate a liquidating break and put the majors
back on even footing for an attempt to make new 2006 highs by the end of the
year. Due up this week in the US is Balance of Trade on Tuesday, CPI and
Michigan Sentiment on Friday. Should US data disappoint look for the pairs to
close the week near the highs as traders lighten their books into the G-7
meeting.
EURO/USD Daily
R3: 1.2830
R2: 1.2780
R1: 1.2740/50
Current Price : 1.2717
S1: 1.2680
S2: 1.2650
S3: 1.2600
Pair respecting potential long-term up trend in place from
end of last year, some potential support from 100 bar MA as well, offers seen
at the 1.2740 area in European overnight trade but stops said to be layered
above the 1.2750 area suggesting that shorts are in the market from the highs.
Long liquidation break may have been the result of last week’s trade; sharp
rally to the highs possible.
USD/JPY Daily
R3: 118.20
R2: 117.80
R1: 117.40/50
Current Price : 117.33
S1: 117.00
S2: 116.50
S3: 116.00
Pair firm on cross-spreading, not on USD strength; look for
a massive break if any news is Yen supportive. Great short potential above the
117.30 area; aggressive traders can add to existing shorts anytime. Any move
higher into reported stops above 117.50 likely to be capped by exporter
selling. CTA type accounts may be long from 116.50 area.
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