Morning Forex Briefing
The USD is trading mixed to start New York after a very two-sided technical overnight session. As expected, existing S/R levels continue to contain trade but downside risks to the greenback appear to be higher as the week gets underway fully. Back from the Japanese holiday, traders in Tokyo saw aggressive trade in the Yen crosses overnight; perhaps in “catch-up†trade from their extended holiday sessions. The Yen is firmer against most of the major currencies with the USD/JPY a bit firmer as the USD gains by default from unwinding of Yen carry trades. Technical studies suggest the USD/JPY is overbought and due for a correction and analysts point out that exporters have been very active at the 119.00, 119.20 and 119.30 areas in the past 30 days suggesting that the rate has a top in place somewhere under the 119.50 area.
GBP has rallied sharply against the USD overnight into areas of reported offers at 1.9430/50 area; high print at 1.9458 before falling back on profit taking traders say. Good fund demand reported in Cable and potential M&A action as well.
EURO continues to remain a bit more on the defensive holding below the 1.3050 area; traders note that the EURO is well supported on breaks with sovereign demand on pullbacks. Offers said to be in place layered from 1.3050 to 1.3070 suggesting that a cap is in place somewhere below the 1.3100 handle. Analysts suggest that a move over the 1.3070 area will likely trigger large long-timeframe stops and possibly a rotation back to the 2006 highs as large position traders cover early shorts. German wholesale price index is due on Wednesday and may encourage the bulls a bit if the news is seen as EURO positive; the door to more ECB rate hikes is open and this month’s general council meeting has not ruled out a rate hike this month. In my view, the USD is setting up for a decline into recent near-term support suggesting that the highs for the month are in. I look for the majors to put on weight this week and a short-covering rally late into Friday to finish; look for the USD to loose a lot of ground into the FOMC meeting at the end of the month.
GBP/USD Daily
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R3: 1.9520
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R2: 1.9480
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R1: 1.9440/50
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Current Price : 1.9418
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S1: 1.9380/90
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S2: 1.9350
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S3: 1.9300
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Pair holding above 50 bar MA and looking very much like a double-bottom is in place at the monthly low prints. Upside said to have stops layered with offers suggesting violent two-way trade could develop on a breach of key resistance; initially said to be around the 1.9470 area. Close over that figure likely to encourage a round of short covering. Bids layered down to 1.9300 traders say; lot’s of sovereign interest.
USD/JPY Daily
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R3: 119.80
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R2: 119.50
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R1: 119.30
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Current Price : 119.22
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S1: 119.00
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S2: 118.80
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S3: 118.60
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Pair has lots of sell interest layered to 119.80; mostly exporters and cross-spreaders. Bids layered down to 118.60 area with stops mixed in. Traders say 118.00 area pivotal for now and hourly studies going overbought suggesting a fall back to test the lows likely near-term. Model accounts reported active on the bid overnight; look for a sell-off late in the day Tuesday. OK to SELL more into this rally.
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Jason Jankovsky
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