Morning Forex Briefing
The USD is lower in New York after starting flat-to-mixed in Asia overnight.
Most likely the UK CBI report showing larger-than-expected consumer pricing started the USD sell-off against the GBP which spilled-over into the other pairs. The USD is now under selling pressure across the board and on the lows to start New York.
Cable has rallied to a high print at 1.9897 the highest prices for Sterling since September 1992; traders note strong appetite for GBP from cross-spreaders as speculation grows that the BOE will again be looking to raise rates sooner-rather-than-later. EURO is tracking GBP higher initially on sympathy but outright purchase of EURO by middle-Eastern central banks and official sources rumored at around the 1.2980 area prompted a round of short-covering by late shorts.
Stops have fired off across the board but traders say most noticeable are stops in USD/JPY currently at 121.10 area and volumes are heavy traders say. For those traders monitoring the activity of the “black box†system traders it is important to note that bids were seen at some desks at 121.30 area for those types of accounts. Likely their new stops will be under previous resistance areas at 120.80 area suggesting that a further decline to that area is likely during the rest of today’s trade or possibly ahead of the London fix. In my view, the time is now to ADD to winning positions across the board in your USD shorts.
No real economic news is due for the USD until Thursday and Friday and the President’s State of the Union speech will likely be seen as USD neutral after today’s action. The most likely potential is for the USD to follow-through to the downside into Thursday providing a good opportunity for the short-seller to maximize his gains. Look for volatility in the majors during the day but rallies should be on lighter volumes and fail into the end of the week.
GBP/USD Daily
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R3: ?
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R2: ?
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R1: ?
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Current Price : 1.9900
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S1: 1.9840/50
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S2: 1.9800
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S3: 1.9760
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Rate scores highest price since 1992 and earlier, not a good idea to stay long into “no man’s land†in my view. Suggest covering winning long positions and wait for further clues before attempting either side. Aggressive traders can lighten positions and try for the psychological 2.00 level but volatility will get huge in the coming sessions.
USD/JPY Daily
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R3: 122.00
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R2: 121.80
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R1: 121.40/50
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Current Price : 121.16
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S1: 121.00
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S2: 120.60
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S3: 120.20
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Pair has outside day engulfing reversal day from 18 month high (?); likely a sell-off of some amount is developing. Expect a test of the first fib defense within 72 hours putting a potential reversal week in play. Near-term target of the 50 bar MA would be initial target on your shorts. Expect volatility to spill over from Yen cross spreaders but main thrust should be lower in this pair.
Please see www. ProEdgeFX.com for details.
Jason Jankovsky
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