Morning forex briefing
The Greenback is higher this
morning after drifting lower in Asia ahead of the German IFO sentiment index,
volumes lighter as well into early European trade. IFO forecast at 104.0 came
in at 104.9; down 0.1 from last month’s 105.0 reading. Traders say this
normally would be a EURO neutral reading and not much price action either way
but this morning sources are citing a report in MNI news that German officials
have suggested to Beijing that China should not sell its USD reserves and move
reserves into EURO or other currencies. Active cross spreading for EURO and
GBP pairs has but the USD on the offensive and most of the major USD pairs are
softer against the Greenback this morning.
GBP has dropped through near-term support at 1.8980
established the past week or so for a low print at 1.8937 triggering stops
along the way suggesting that the market has gotten long recently and has been
“surprisedâ€. EURO broke lower as well on the German/China news finding both
willing sellers and stops layered from 1.2750 near-term support through the
base of the recent strength at the 1.2700 handle; low prints at 1.2683 where
bids are said to be heavy and currently EURO trades 1.2690 area. Other news
overnight has been slim but USD/JPY traders are bracing for a large move in
the Yen at anytime. In view of the non-USD cross action recently combined with
a lackluster USD/JPY response to the German/China news traders expect that
bids under the pair will erode or be pulled should the USD/JPY not manage
solid trade above the 117.00 handle.
China set the Yuan at another record high against the USD
overnight and given the potential for the Yen to strengthen as the Yuan
appreciates it appears that the USD/JPY pair will not follow suit with the
European pairs near-term. In my view, the USD has just provided the absolute
best short-selling opportunity you could ask for. The failure to attract solid
buying in Asia on the back of the recent fundamentals suggests that Asia is
interested in a falling USD. There is no getting around the fact that the 4th
largest economy in the world is under pressure to revalue their currency and
when they do the USD will depreciate. We may be at one of the significant
weeks in this process and today just might be the day the USD/JPY pair signals
that the bear trend is the better probability. Look to sell the USD/JPY.
USD/JPY Daily
R3: 117.50
R2: 117.00
R1: 116.80
Current Price : 116.45
S1: 116.00/10
S2: 115.80
S3: 115.60
Pair looking to base here for a break lower in my view, look
for a failure at the 116.00 to attract additional selling. US data in the
background near-term. 50 bar MA offering some technical support but fresh
buying seems absent. Technical trading likely ahead of the end of the week if
US data disappoints the USD bulls; a softer tone is developing long-term I
think.
USD/CHF Daily
R3: 1.2550
R2: 1.2520
R1: 1.2450
Current Price : 1.2427
S1: 1.2400
S2: 1.2380
S3: 1.2320
Pair finding some buying under the market from
follow-through selling Friday, today’s action likely in sympathy with GBP and
EURO strength but unlikely to last. Some cross-spreading for EURO/CHF likely
to be supporting USD; selling opportunity in my view. Aggressive traders can
sell anytime and fade the overnight fundamental strength of the USD.
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