Morning Forex Briefing

The USD is starting New York higher across the board after a quiet start in Asia.
Heading into European trade the Greenback was relatively unchanged from closing levels Thursday but later in the European session buyers started to emerge and the majors retreated in holiday volume. Traders note that the 117.90/118.00 area in USD/JPY held solid offers from Asian sovereign names and exporters with stops noted above. Eventually bids continued to erode the cap and the rate went into the stops for a high print ahead of New York at 118.28. The Tankan report was released about as expected and some analysts now say there is little chance of a BOJ rate hike next week. Most agree that either February or the latest March the BOJ will hike 25 BP but some say January will be the next rate hike.

The US delegation to China is making very little progress in the trade area analysts say. So far nothing has been discussed or agreed on that hasn’t already been discussed or agreed on; most traders are no seeing the trip as a non-event and are turning their attention to economic releases due today and next week. Today’s data will likely be USD neutral to bearish as inflation appears well contained and TICS has covered the last five releases; no real news on that front I think. Cable is lower but still attracting bids; low print at 1.9556 after reported stops under the 1.9580 fired off.

GBP has followed EURO lower and EURO has hit stops under the 1.3120 area of reported strong bids. It seems that the USD is a bit firmer than traders had expected but some are attributing that to holiday trade and book squaring. Most agree that the USD remains bearish overall but that this recent show of firmness is likely a correction on a bit larger scale. The “buy dips in EURO” sentiment is taking a few lumps but overall most analysts are looking for a higher EURO into Q1 2007. Technical levels will be reached today after the release of the USD data in my view; I think some intraday volatility is coming after the violent two-way action we have seen this week. Look for US data to trigger additional close in stops but for the dips to be bought. I think this week’s USD strength is residual and due to run out before the end of the year.


R3: 1.9720

R2: 1.9660

R1: 1.9600

Current Price : 1.9560

S1: 1.9540/50

S2: 1.9500/10

S3: 1.9450

Pair still within established ranges but today’s weakness seems on lighter volume; some traders say the holiday conditions are exaggerating moves. First level fib defense likely to hold a second time, aggressive traders could buy on a test of the 1.9500/20 area should support at 1.9550 give way; look for a solid rotation to the top of the range near 1.9700 near-term.


R3: 1.3300

R2: 1.3220

R1: 1.3150

Current Price : 1.3106

S1: 1.3080

S2: 1.3020/30

S3: 1.2980

Rate dropping through bottom of recent support base into stops under the 1.3120/30 area, momentum studies target 1.3030 area which is also 38.2% fib defense. Should US data be USD friendly, stops under the 1.3080 area likely to be triggered for a break. Close under 1.3150 likely to lighten bullish enthusiasm. Dips are being bought by large names consistently but they also might be selling into rallies.

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Jason Alan Jankovsky

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