Morning Forex Briefing
Initially starting firmer to mixed in Asia the USD opens New York weaker after selling off in European trade as traders find the rates mostly driven by technical factors and stops. Across the board the USD is under pressure due mostly from stop-driven trade as the late long continues to take heat. Traders note that overnight comments by IMF’s Ratio suggesting that the Yen carry trade is increasing global imbalances and will upset exchange rates has given weak JPY shorts urge to cover; the USD/JPY has found waves of stop-driven trade down to a low print at 119.27 with bids not expected until the monthly low at 119.00 area. Traders
be advised that the 118.80 area is rumored to have hefty stops waiting so any attempt at that area likely to be met with large volatility as technical traders square off against large speculators. A break of the 118.80 area represents a solid break through the years opening range and a technical follow-through to a low target of 116.50 area represents a solid loss of 1% or more in the USD/JPY value during a 90 day carry suggesting that the carry trade holders will be getting very nervous should the rate find stops under the 118.80 area today.
Cable is holding firm at the 1.9630 area in New York having stalled on a rally into the 1.9670 area overnight. Traders note active selling and Yen cross-spreading holding the rate lower but dips under the 1.9600 handle were bough quickly keeping the rate buoyant.
EURO has a solid grip on the 1.3200 handle to start New York finding stops above the 1.3210 area for a high print at 1.3232 before finding offers. Analysts note that a close above the 1.3200 handle again targets near-term objective of 1.3300 with stops likely building above the 1.3240/50 area near-term. In my view, the USD has fallen back to challenge bids across the board and the potential for a USD rally is there. If holding longs in the majors it is advisable to lighten up on your position and wait for a pullback to existing support before adding again. Aggressive traders can hold for a test of the 2007 highs but expect that the pairs will likely do a lot of two-way trading between now and then. Look for the USD to flatten out after today’s’ data. Most likely USD data this week will not be USD friendly and a further break of the USD should be used to lighten up on USD shorts and prepare for a corrective bounce. ADD on that bounce I think.
USD/JPY Daily
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R3: 120.00
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R2: 119.80
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R1: 119.50
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Current Price : 119.24
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S1: 119.00
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S2: 118.80
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S3: 118.40
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Rate clearly falling back on aggressive close-in stops, once cleared rate is vulnerable to a bounce. Aggressive traders can sell a rally into the 119.80 to 120.20 area but expect that a break of 118.80 to never look back. If rate is topping the next solid rally may be the only chance to get a low-risk short. Look for any strength to be sold, break of 118.50 targets mid 116.00 handle in my view.
EURO/USD Daily
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R3: 1.3300
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R2: 1.3270/80
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R1: 1.3250
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Current Price : 1.3220
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S1: 1.3200
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S2: 1.3180
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S3: 1.3150
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Rate firm on good volumes with active buying and stops fueling the rise into near-term resistance. Look for the rate to fall back and test the 1.3180 area where you can ADD with good confidence. Close above the 1.3200 area opens the door for a test of the 1.3300 area. Look for model and momentum accounts on the bid into highs the next 48 hours to signal a pullback.
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Jason Jankovsky
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