Morning Forex Briefing
2007 begins with the USD under selling pressure this morning after a lighter overnight session with residual holiday thin conditions continuing to affect trade. Holidays remain for some Asian countries through Thursday this week but volumes have been a bit on the larger side traders say. As expected, technical trade appears to remain dominate to start the New Year and with a shorter week to work against most traders expect the USD to remain inside the recent December ranges for the near term; economic news due out this week largely non-events with the exception of NFP due on Friday. Should the economy show additional job creation above expectations this time the USD could see a large rally to finish the week but in my view that rally will be sold heavily in any case.
Regardless of what the majority of analysts hold for projections of the USD’s value through the year the fact still remains that unless the US (and other nations) address the China situation (with respect for their currency) the USD is very vulnerable to a fall in value. Any near-term strength should be a selling opportunity in my view.
Overnight the USD fell to 1.9739 against the GBP; traders note that supply was adequate into the highs which are technical resistance levels from December. EURO had much the same start to the week as well, trading to a high print at the 1.3291 area before the rate fell to option defense rumored at 1.3300 and 1.3320 areas; look for the 1.3340/50 area also to attract selling as this is also a technical resistance level.
USD/JPY remained range bound and attracting little action either way due to the holidays that remain through the end of the week in Japan. High prints at 119.08 were sold reasonably well but dips back to the 118.50 area also seen activity on the bid; some traders say the pair will also remain range bound through the week into NFP on Friday. In my view, as we start the 2007 trading year, traders need to remain focused on the longer-term structural deficiencies in the USD. Regardless of the near-term strength the Greenback has more downside potential than upside in my view and those traders looking to capitalize on the best opportunity for the year would be wise to see this residual USD strength from 2006 as a selling opportunity. Look for the USD to remain range bound for the week; sell rallies.
GBP/USD Daily
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R3: 1.9850/60
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R2: 1.9780
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R1: 1.9720/30
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Current Price : 1.9706
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S1: 1.9650
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S2: 1.9600
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S3: 1.9560
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Pair holding under near-term range-channel, a short-term selling opportunity for short-term traders. Better change to buy dips in my view, stops rumored to be below the 1.9600 area but bids layered down to bottom of range to the mid-1.9500 areas. Break above the 1.9730 area likely to expose stops; little technical resistance ahead of 1.9850 area of potential double-top. Look for S/R to hold through Friday.
USD/JPY Daily
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R3: 1.2030/40
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R2: 119.80
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R1: 119.20
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Current Price : 118.84
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S1: 118.40/50
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S2: 117.80/90
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S3: 117.40/50
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Look for current S/R to hold as conditions remain thinner in this pair due to remaining holiday trade in Asia the next few days. Option defense likely from both sides near-term so offers said to be 119.20/30 area likely to top the pair and bids said to be 118.40 area likely to support. Look for range to hold until Friday’s US data.
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Jason Jankovsky
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