Morning Forex Briefing

I’m back after a short holiday break and this newsletter is the first morning briefing for this week, I hope everyone has had a great Thanksgiving break as well and is ready for the last few weeks of the 2006 trading year. Heading into the end of Q4 trading volumes are typically lighter and many market participants will be on extended holiday so be prepared for lighter volumes and potentially higher volatility as many desks will be shorter staffed and speculative participation will be lighter. Still, with the end of year holiday trade situation beginning to develop, the USD has fallen to significant lows against the majors during the Thanksgiving Holiday.

Stabilizing a bit this morning after a quieter two-sided overnight Asian session, the USD is consolidating losses ahead of today’s preliminary Q3 GDP and Housing Sales data. Many analysts are suggesting that a slow-down in the US economy is well factored into current USD pricing but with the recent sharp break against the majors the potential for additional surprises seems likely. Forecast at +1.8%, the effects of higher oil pricing and slowing home growth are beginning to show in economic growth and the long-term implications for the USD can only be continued weakness in my view.

Rising to a 20 month high, EURO has scored the 1.3200 handle briefly in overnight trade before falling back on light profit-taking by well-placed longs from last week. Traders say US names were on the bid on the breaks but so far the EURO is well off the overnight highs. Cable is also under topping pressure and traders note that a UK clearer was active on the sell-side earlier in the European session suggesting that well-placed longs may be liquidating in that rate as well.

USD/JPY is firm at 116.30 area after a brief dip to the 115.50 area before buyers stepped in suggesting that all the majors are about ready for a corrective pullback. Should US data disappoint today and tomorrow a rally to fresh 2006 highs may result but a corrective pullback is the most likely and healthy way for the USD to weaken further. Look for continued two-way trade near-term.


R3: 117.60

R2: 117.20

R1: 116.80

Current Price : 116.39

S1: 115.80

S2: 115.40/50

S3: 114.50

Pair showing signs of a near-term recovery; look for continued two-way trade with further downside pressure should rate rally back to the 100 bar MA. 50% fib defense likely on further weakness to the 114.50 area so be prepared for a bounce. Stops said to be under the 115.50 area of recent lows, and above the 117.40 area. Close above 116.80 likely to draw short-covering.


R3: 1.3280

R2: 1.3250

R1: 1.3220/30

Current Price : 1.3150

S1: 1.3100

S2: 1.3050

S3: 1.2980/90

Pair extended into technical resistance and is showing signs of near-term topping with a reversal bar from the highs. Look for corrective pullback and wait for fib defense to go long in my view. Stops likely in the 1.3100 area with a close under 1.3050 likely to draw long liquidation. Look for support around 1.2950 area to hold on a pullback.

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Jason Alan Jankovsky

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