Morning forex briefing
Overnight Asia saw the USD gain a
bit of strength only to see European trade selling keeping the USD
range-bound and two-sided through the opening in New York. Traders note that
all eyes are on the US GDP number but Japan CPI gave a reason for a little
action overnight. Coming in softer than expected showing that deflation is not
slowing like the BOJ would need before hiking rates, traders now feel the BOJ
will most likely wait until after the first of the year to move rates 25 BP
higher. USD/JPY rallied to the 118.80 area before active selling capped the
move and the pair returned to pre-report levels during European trade.
EURO also saw two-sided trade but with much less volatility
keeping support in the 1.2660 area intact and capped at the highs of 1.2715
ahead of reported supply at 1.2720. Cable is keeping a tight 75 pip range
ahead of GDP today with solid support at 1.8870 area and upside resistance
just under 1.8930. Offers said to be layered up to the 1.9020 area but traders
expect that a disappointing GDP number may push the pair to reported stops
above the 1.9030 area before a correction may be seen. In my view, overnight
action is business as usual for the markets and today’s fundamental news will
likely be a catalyst for further long-liquidation in the USD.
All the pairs have held over previous resistance numbers and
the move higher has been stop-driven for the most part. Active selling of the
USD is on the lighter side I believe which leads me to conclude that the
market is still heavily long USD right now. Current sentiment may be changing
in favor of the USD bears so I would expect that a disappointing GDP number
will cause a run for the exits by the remaining USD bulls. Look for a pullback
in the USD to accelerate should stops at critical support/resistance be
triggered: GBP 1.9020, EURO 1.2750, USD/JPY 118.00 and USD/CHF 1.2480.
GBP/USD Daily
R3: 1.9050
R2: 1.9000
R1: 1.8940/50
Current Price : 1.8913
S1: 1.8880
S2: 1.8830
S3: 1.8780
Pair hovering under resistance zone at 1.8930 area, stops
said to be layered above perhaps as high as 1.9020. Offers from larger Asian
names seen at 1.8920 overnight. Trend line resistance at 1.9000 likely to cap
near-term but a close above 1.9030 opens the door for test of the 1.9100
handle. All eyes on GDP and expect volatility around the number.
USD/JPY Daily
R3: 119.80
R2: 119.30
R1: 118.80
Current Price : 118.45
S1: 118.20
S2: 118.00
S3: 117.50
Pair firm on light pre-report volume but disappointing news
for Yen bulls was not enough to break the Yen suggesting that the USD/JPY pair
is structurally weak this morning. Look for stops to trigger under 118.00 and
possibly active selling on the break. Rally to 119.00 area will likely draw
selling interest so expect volatility.
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