Morning forex briefing
The USD remained quiet overnight consolidating the recent rally in solid two-way action. Starting in Asia the USD remained firm and the majors pushed slightly lower but rumors of a possible second nuclear test by North Korea kept traders on the sidelines. Still unconfirmed, the Japanese suggest that maybe the data they have is an earthquake not a second nuke; USD/JPY fell on the news as flight-to-quality buying was liquidated. USD/JPY was able to trade to a high print at 119.78 before finally reversing; still in a tight range to start New York with a low print at 119.40 overnight. Exporters on the offer and more resting offers said to be layered up to the 120.00 area which might make further USD gains slow-going; technical traders are in the buy-mode so expect support on dips with solid technical support back at the breakout area of 118.50. Cable managed to post a new weekly low at 1.8517 before rebounding, technical studies suggest that the pair remains in the sell-mode but willing buyers appear to be ready to step in; volumes were moderate but traders note that the speculation for further BOE rate hikes continues to keep regular players sidelined.
EURO continues to remain ahead of solid technical support, currently a bit better on the day to start New York at 1.2540; traders note that sovereign demand and semi-official names were seen at the dip to the 1.2525 area overnight suggesting that support at the 1.2500 area will be the extent of this recent break. In my view, today is the day to execute your short USD positions. Traders can sell USD across the board for the pull as structural USD weakness begins to pressure the Greenback into the end of the year. Look for the major pairs to rally in the next 72 hours or so with Wednesday’s trade the low’s for the week and possibly for the month.
Today’s FOMC data is no factor in my view, the statement and general tone of the previous FOMC minutes suggests that the Fed will remain in the “wait and see†mode for quite some time; this minutes will not be changed much I think. Tomorrow is Balance of Trade; look for the trade deficit to remain worse than expected.
GBP/USD Daily
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R3: 1.8720
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R2: 1.8680
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R1: 1.8620
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Current Price : 1.8578
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S1: 1.8520
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S2: 1.8450
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S3: 1.8400
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Pair makes a low-volume low and rebounds to high end of the range setting up a potential reversal pattern; close back over the 1.8680 area will encourage the bulls but bears likely to sell strength at least once. Look for upward progress to be slow-going but short-covering rally likely if US data disappoints the USD bulls near-term. Stops said to be resting 1.8480 area ahead of bids at 1.8450 area.
USD/JPY Daily
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R3: 120.40
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R2: 120.00
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R1: 119.80
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Current Price : 119.46
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S1: 119.20
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S2: 118.80
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S3: 118.50
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Pair likely to continue consolidating gains but double-top formation suggests that potential top is in at the new 2006 highs. Fundamentals are in play that normally wouldn’t be and the China situation will come to a head after the US elections; potential for this area to be a long-term top are larger. Look to sell the pair and wait for a close back below the 118.50 area to confirm a near-term top.
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