Morning Forex Briefing

The USD is slightly better this morning after a bout of profit-taking in Asia; traders note that the tighter ranges and end-of-month plus end-of-quarter pressures have put the majors on the defense. Technically, the USD/JPY held the current bear-pennant formation after yesterday’s rally and most likely is prone to technical selling around the 118.20 area of topside pennant resistance; traders note that last nights’ release of Japanese CPI data as well as other data suggesting that deflation is ending helped fuel traders’ interest to lighten up on USD/JPY positions and the rate was pressured into close in stops. Making a low-print at 117.48 in Asia the USD began a slow recovery and by the New York open had recovered to the opening range at the 118.10 area suggesting that the rate is potentially ready for an upside breakout near-term.

GBP remains under pressure from Yen cross spreading but unable to rally past existing range top from recent trade. Low prints under the 1.9550 area encouraged some technical buying and the pair has recovered to the 1.9600 handle once again suggesting that near-term volatility will continue. Adding pressure to the rate is continuing tensions with Iran over the fate of captured British soldiers. Potential tensions may escalate in the region fueling the possibility of light flight to quality buying of the USD keeping the GBP
under downside bias in my view.

EURO
continued to attract the least amount of attention and traders continued to
complain of tight ranges and lower volumes. Semi-official buyers were noted
yesterday around the lows at 1.3320 area but light stops elected overnight
Europe gave a low print at 1.3296; rate currently hovering around the opening
range at 1.3320 with little chance of a large move traders say. Today the US
economic data is light with most attention on the Michigan Sentiment index due
out at 9:00 AM CDT. Most attention overnight was on the Yen crosses and general
book squaring/profit taking to end the quarter so I don’t think that traders
will be very interested in opening new positions on the last day of the month
and quarter; Michigan sentiment will likely simply force the remaining traders
with open positions to liquidate. Once that is done, expect the markets to fade
off completely and remain in tight ranges with little volume after the London
Fix. Basically the day will be over by around 10:00 AM CDT.

GBP/USD Daily

Rate finding support at the 50 bar MA and lower end of established range, look for the rate to find stops under the 1.9540 area near-term and a push to support 1.9500 is likely. 100 bar MA will offer support as well as fib defense. BUY with both hands at the 1.9500-1.9480 area for a rally into the 2007 highs.

USD/JPY Daily

Pair continues to respect bear-pennant suggesting heavy resistance along the upper trend line area; traders say that offers are layered between 118.20 and 118.50 with stops above. Should rate trigger upside stops pressure can be expected at the 50 bar MA. Fall back from 118.50 areas would be a “head fake” and expect a reversal. Support back at 117.40 area and again at lower trend line area.

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Jason
Jankovsky

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