Morning forex briefing
The USD opened the week in two-sided fashion, remaining firmer to start Asia and then falling back a bit into European trade finally closing lower to end New York today.
Traders note that today’s better-than-expected Empire State Index gave little direction to the majors but remind that the USD is at some loftier levels the past several sessions and likely due for a pullback; it will take a solid piece of fundamental news favorable to the USD to get much more out of the recent strength.
Particularly vulnerable is the USD/JPY today; failing at the 119.80 area three times in three days has analysts a bit nervous for a test of the 120.00 handle. Low prints marked in New York at the 119.00 area not seen since Wednesday last week suggest that support at 118.60 area likely to be tested soon. Rumors of Russian central bank buys of JPY were confirmed and traders sold USD/JPY on the news, volumes were unimpressive and generally light after the European close. Cable has remained firm above the 1.8600 handle, high print 1.8650 but noted sellers overnight included a large US investment house.
UK Homes Sales data suggested that prices were not falling at all for the recent time frame lending fuel to the speculation that the BOE will be in the rate hike mode at the next MPC meeting; traders feel that a 25 BP rate hike is not currently reflected in GBP pricing. GBP strength spilled over into EURO during the day; EURO held firm above the 1.2500 handle as well and bids were plentiful under the 1.2490 area as expected. Stops are said to be resting under the 1.2480 area but traders remind that the 1.2455 July lows will likely draw buying so EURO may have posted a near-term bottom at this price area. In my view, the USD is setting up for a retracement this week. Look for continued consolidation into tomorrow’s PPI and TICS data but after CPI on Wednesday look for the USD to finish lower on the week. In my view, the USD is looking a bit “tired†at these levels and a correction is likely.
 USD/CHF Daily
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R3: 1.8780
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R2: 1.8700
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R1: 1.8640
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Current Price : 1.8615
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S1: 1.8600
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S2: 1.8550
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S3: 1.8510
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Rate consolidates again for a third day; support under at 1.8510/20 remains firm with 1.8640 capping any near-term strength. 100 bar MA likely to cap tomorrow should volatility rise after US data in the morning. Close over 1.8700 area likely to excite the bulls; under 1.8520 will bring the bears out again. Look for two-sided trade and quiet volume ahead of US data Tuesday.
USD/JPY Daily
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R3: 8600
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R2: 8550
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R1: 8500
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Current Price : 8466
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S1: 8430
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S2: 8350
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S3: 8270
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Rate holds support at the 8440 area in lighter volume but massive overhang of open short positions likely to spark a rally if close-in stops are triggered; rumors of sizable stops at the 8500/8520 area. 50 bar MA likely to offer some resistance so expect a failure from the first attempt at 8600 area. Close under 8420 likely to attract more selling. Close over the 8600 area likely to attract new longs.
Jason Alan Jankovsky
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