Morning Forex Briefing

The USD is mixed to better this morning after another overnight session that was largely two-way. Traders note that the greenback is trading more technically this morning and expect that the majority of any action will be ahead of the London Fix as no real news is due after housing data at 7:30 Am CDT. Forecast at 1450K, housing starts may be a bit more closely watched analysts say due to the recent concern over sub-prime lending and potential foreclosures. In my view, the downturn in the housing market is a known fact and the concern is over-rated; I think that the Fed is on course to keep rates where they are and today’s data will not prompt anything but speculation they will lower rates. I think that news is factored into pricing and after the release; any flutter in the price of the USD is an opportunity to get positioned for the continued USD bearishness on the table.

As expected, the BOJ held rates firm and issued no real market-moving statement. USD/JPY had a brief knee-jerk reaction to the news dropping to a low of 117.30 but then reversed back into close-in stops set by eager shorts; traders say the highs around the 117.80 area should contain the upside near-term. Offers said to be thick above the 117.80 area and any attempt over the 118.00 area will be slow going traders say; high print at 118.02 overnight was quickly sold and stops rumored to be above the 118.10/20 area are untouched for now.

Better than expected UK CPI data rallied GBP during European trade this morning, traders note that Eastern European demand for GBP/JPY helped underpin the GBP so far today. Upside in Cable may be limited today as traders note that the rate has reached the technical area where sellers were found in large numbers earlier in the month; should the monthly bear find an interest at current levels the GBP may have a sharp reversal to end the week.

EURO is lower against eh USD this morning finding little or no interest overnight as traders remained focused on Yen crosses. High print at 1.3315 is a lower high from yesterday and low print at 1.3270 is a lower low suggesting that perhaps the high seen last week is near-term resistance as the rate slowly deflates. Although sentiment remains bullish for EURO it is looking like the rate will fall back from current levels a bit and aggressive traders need to be ready to buy that dip. In my view, the USD is range trading and set to rotate lower now that the upside has been tested but the current focus on Yen pairs may keep the Greenback two-sided and mixed a bit.


R3: 1.9650

R2: 1.9620

R1: 1.9580

Current Price : 1.9567

S1: 1.9540

S2: 1.9500

S3: 1.9480

Rate rallies on positive UK news but upside was muted traders say and good selling was seen suggesting that the rally was an orderly selling opportunity. A fall back by today’s close into the 1.9500 area would likely set-up a sell off near-term. 50 bar MA likely to offer some resistance today; look for the upside to remain labored and a bout of profit-taking. OK to lighten open longs.


R3: 118.80

R2: 118.50

R1: 118.00/10

Current Price : 117.78

S1: 117.30

S2: 117.00

S3: 116.80

Rate continues to respect developing bear pennant in my view, a rotation lower is likely and support is likely at the 117.00/116.80 area as the rate prepares to break-out one way or the other. Upside breakout likely to be sold as Yen cross spreaders are on the offer from the highs. Stops said to be building above the 118.20 area and offers are thick ahead of 118.00; ok to ADD to open shorts in USD/JPY.

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