Morning Forex Briefing

The USD is firmer against the major pairs but choppy in two-way trade ahead of the BOJ rate announcement overnight. Traders are still sidelined while China observes the Lunar New year holiday but Japan is back to work; New York starts the first full day of the week here in the US this morning after the Presidents day Holiday. Mostly two-way until this morning the Greenback is in thinner conditions as traders await the BOJ decision; most analysts are putting a 65% chance of a rate hike of 25 BP but caution that the wording of the statement is likely to be more important moving forward.

JPY crosses were heavy in demand overnight and the USD/JPY has rallied back to the heavily defended 120.20 area of previous support/resistance. Exporters were seen on the offer at 120.00 traders say but demand from Japanese banks pressed the rate through light stops and fresh buying. High prints into the New York open are 120.36 so far but traders warn that the 120.50/60 area will be very tough to break.

GBP is two-way and hovering around the 1.9500 area after firming from the sell-off seen Monday morning in thinner conditions from the BOE statement. The MPC minutes from the last meeting will be released Wednesday in addition to the BOJ announcement and should that show a serious rift developing between the hawks and doves the GBP could be susceptible to an additional sell-off. In my view the GBP is consolidating before another leg higher to test hard resistance at the psychological 2.00 level. I think the rate has the underlying strength to continue climbing against the USD but there are enough uncertainties regarding the US side of the equation that the rate will likely remain range-bound through the rest of Q1.

EURO continues to build upside strength, high prints overnight at 1.3191 before running into technical selling. “Buy the dips” remains the preferred strategy it appears and traders note that the more time the EURO remains above the 1.3100 to 1.3120 area the better the confirmation of the upside breakout from the previous consolidation. In my view, the EURO is basing for an eventual test of the 2007 highs so I am a strong buyer on weakness; look for the 1.3080 area to hold on a sell-off and buy it with both hands if it gets there. Dips to 1.3120 are great buys also in my view. Look for volumes to remain lighter ahead of tonight’s BOJ announcement; dips in the majors can be bought for the week.


R3: 1.9600

R2: 1.9580

R1: 1.9550

Current Price : 1.9512

S1: 1.9480/90

S2: 1.9450

S3: 1.9400

Rate continues to respect downside support at the 1.9480 area and appears to be firming for another test of upside resistance. Close over the 50 bar MA needed to restore bullish enthusiasm, stops said to be resting over the 1.9580 area suggesting that the bears are using the MA for entry. Stops under 1.9400 area said to be thick with bids layered so expect two-way action for the rest of the week.


R3: 121.00

R2: 120.80

R1: 120.30/40

Current Price : 120.14

S1: 119.80/90

S2: 119.40/50

S3: 119.00

Rate recovers to test the previous support area between 119.90 and 120.30 and so far is meeting offers above the 120.20 area. Look for stops under the rate to build around the 119.40 area and lower as late longs establish positions on this strength and run stops close-in; model accounts noted some traders say. Look for a long selling wick on the daily action one day this week.


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Jason Jankovsky

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