Morning Forex Briefing
The USD firmed a bit overnight as traders began to book gains from this week’s sharp fall against the majors.
Although the economic calendar was light overnight, traders note that aggressive selling of the majors on USD near-term strength appears to be technical in nature and players are not focused on news but on potential tops across the board. Cross-spreaders for the non-USD pairs were active and volatility is expected to increase during the next few days as traders continue to adjust positions heading into the end-of-year.
Analysts remind that cable and EURO are at some very lofty levels and the sharp advance this week puts those pairs at record prices against non-USD pairs suggesting that a correction will pressure the USD higher almost by default. Fresh 2006 highs were scored in cable and EURO overnight but both rates fell back quickly as option defense capped the rallies at 1.9751 and 1.3283 respectively. Traders note that aggressive selling of cable and EURO by Asian central banks supported the USD at levels agreed to be key support and analysts are suggesting that the USD has finally found a near-term bottom.
GBP/USD opens New York at 1.9677 and technically is approaching overbought conditions; traders look for a profit-taking break as solid gains are booked by the longs. EURO opens New York at unchanged levels from Thursday’s closing prices and the fall back in sympathy with GBP looks like a technical failure at a high suggesting that the rate is also set for a corrective break.
USD/JPY is firm at 116.20 to open New York after reaching close to the weekly high overnight adding fuel to the argument that the USD is set for a bounce. In my view, a lot of money is to be made near-term as the USD rallies back from this week’s sharp break. I think the major pairs will likely remain in solid two-way trade ahead of the end-of-year but that range will be quite large covering a lot of the same ground twice. Look for the greenback to rally during the next 72 hours and look for technical trade to continue until late next week. The US economic calendar is very light ahead of US Non-Farm Payrolls data next Friday so look for technicals to dominate near-term.
USD/JPY Daily
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R3: 117.20
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R2: 116.80
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R1: 116.40/50
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Current Price : 116.06
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S1: 115.60
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S2: 115.30
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S3: 115.00
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Pair continues to consolidate in established ranges covering the entire weekly range overnight suggesting that the pair is set to bounce. Near-term traders can buy breaks into the 115.60/70 area with confidence and sell into the 116.80 area as pair is likely to range trade before a breakout to the upside. Stops said to be building in the 115.30 area and above the 116.80 area.
EURO/USD Daily
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R3: ?
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R2: 1.2250
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R1: 1.3280
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Current Price : 1.3247
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S1: 1.3210
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S2: 1.3150/60
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S3: 1.3080
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Pair appears to be topping and option defense appears thick ahead of 1.3300 handle; look for a massive long-liquidation break as technical sellers get aggressive with new shorts near-term. Fall back to the 1.2900 area likely as rate corrects and tests the breakout from previous highs. Stops said to be above the 1.3320 area and below the 1.3130 area.
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Jason Alan Jankovsky
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