Morning forex briefing

The USD is breaking hard to start
the New York session this morning after spending a quiet night on the
defensive in Asia.
Initially the Greenback was two-sided and
lighter volumes prevailed as trader’s prepared for the closely watched G-7
meeting this weekend; UK retail sales data gave the markets a surprise into
European trade catching a few players short GBP. Coming in above expectations
at +4.3% for the year, UK retail sales suggested that the potential for UK
inflation to remain above the BOE 2.0% target remains and traders speculated
that another rate hike by the BOE must be in the works taking the GBP to fresh
weekly highs before the start of US trade.

Currently breaking through several layers of upside
resistance, Cable is poised for an attack on the 1.8900 handle this week after
clearing stops rumored to be in the 1.8780, 1.8820 and 1.8840 areas easily
absorbing offers ahead of the current 1.8878 high print for the day. Analysts
note that with today’s action on the books, GBP has apparently put in a
near-term bottom due to solid trade above the previous weekly mid-point; a
technical pivot point. In my view, sterling’s rise is a text book resumption
of trend and players would be wise to buy any reasonable pullback. EURO is
currently tracking GBP higher but is encountering stiff resistance at previous
technical levels; traders note that the 1.2740 area is offering a hard number
but large names on the bid during previous sessions indicate that the market
has had professional buying underneath and late shorts run the risk of a
squeeze today should the rate get into rumored stops said to be layered
between 1.2750 and 1.2780; resting offers in that range may be pulled leaving
the market vulnerable to a massive rally near-term.

USD/JPY remains well-bid but offers appear regularly above
the 117.50 area layered up to 117.80 area; traders suggest that the 118.00
handle is out of range for now as buyers seem unable to take the rate any
higher given USD weakness elsewhere. In my view, it appears the cross
spreaders for Non-USD pairs have just gotten their clocks cleaned and more
upside in the EURO and GBP is on the way. It is only a matter of time before
the Yen and the Swissy follow suit. Aggressive traders can sell the USD with
both hands on any minor rally to the 117.70 area in USD/JPY and 1.2480 area in
USD/CHF. Look for solid one-way trade today so if you are not on board coming
into New York this morning, wait for the pullback ahead of CPI and the weekend
to establish USD shorts.

GBP/USD Daily

R3: 1.8980

R2: 1.8920

R1: 1.8880

Current Price : 1.8870

S1: 1.8820

S2: 1.8780

S3: 1.8740

Pair launches overnight Asia and Europe confirming a
textbook retracement and resumption of trend; look for massive short-covering
to finish the week as long timeframe shorts bail on their early positions.
Look for a reversal week to form on the charts, close over the 1.8900 handle
likely for the week, 1.9050 likely to cap near-term but solid trade above
there likely to draw additional buying for new 2006 highs.

R3: 118.50

R2: 118.00/10

R1: 117.60/80

Current Price : 117.47

S1: 117.30

S2: 116.80

S3: 116.40

Pair showing signs of topping, 72 hours after scoring
significant high print pair has spent on the defensive with zero interest
above the 118.00 handle either way; look for a massive liquidating break with
a potential to fall several handles. Stops said to be building under the
116.00 area of 50 bar MA with a solid close below 115.80 likely should those
stops trigger. Sell rallies.

www.ProEdgeFX.com

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