Morning Forex Briefing

The USD continued in two-way consolidating trade overnight and opens New York
mixed from Wednesday’s closing levels.
Slightly higher against the GBP, steady against the EURO but weaker against the CHF and JPY, the greenback was sold when comments from Japanese and European officials suggested that the value of the Yen was too low at current prices. Initially breaking on the rumors that the G-7 will discuss the weak Yen at the World Economic Forum in Davos this weekend, the USD
rallied after hitting support at the 120.40 area in Yen taking the other pairs
with it.

All eyes were on the Yen crosses overnight and the Yen pairs have seen a lot of volatility the past 24 hours. Yen will likely remain center focus for at least a few more sessions as political rhetoric swirls over the path the BOJ will take regarding the next rate hike. Analysts suggest that the BOJ will likely hike rates ahead of elections in Japan in July; traders note that liquidation of non-USD Yen crosses are pressuring USD/JPY and a pull-back in the pair is increasingly likely. In my view the USD/JPY is due for a larger fall-off and suggest holding shorts; adding to existing positions on a deeper push under fib support is also a solid trade potential. Cable is still correcting from the recent high but finding good bids on the breaks suggesting that late longs may be trying to get positioned; traders report that smaller money accounts have been seen on the bid in the rate.

EURO weakened a bit on the release of German IFO sentiment; a weaker-than-expected number gave the bears a chance to advance their argument that the ECB will not raise rates until later in the year. Bids from sovereign and semi-official names have been seen on the break yesterday and this morning suggesting that the EURO is well-supported under 1.3000 area; adding to open longs in the rate is likely the best move there near-term. In my view the intraday volatility in the majors is to be expected at these levels as market turns often inspire large amount of late traders and short term traders. Should a reversal be developing in the USD it will likely take through the end of another data-cycle leaving the USD vulnerable to two-way trade and volatility for at least another 30 days and perhaps into the end of the quarter. Look for the USD to finish this week lower as US data today and tomorrow is expected to be neutral.


R3: 1.9800

R2: 1.9760

R1: 1.9720/30

Current Price : 1.9696

S1: 1.9650

S2: 1.9580

S3: 1.9520

Pair inside range day so far ahead of US data this morning, look for intraday volatility and sell rallies. Topping pattern still in place and potential for additional selling pressure is increasing if non-USD Yen crosses are liquidated; cable is on the sell-side in that case. Stops said to be layered under 1.9580 area with bids layered ahead. Support likely at the 50 bar MA also.


R3: 122.00

R2: 121.80

R1: 121.20/30

Current Price : 120.89

S1: 120.30

S2: 119.80

S3: 119.20/30

Buyers appear intraday but are unable to overcome offers layered higher. Volumes are lighter on rallies traders say suggesting that small-money or momentum accounts are on the bid. Yen crosses are very active and the USD/JPY is subject to a lot of volatility as Yen is sold for other pairs. Support at 120.00 said to be firm but stops under 119.80 are large traders say.

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Jason Jankovsky

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