Morning Forex Briefing

The USD is softer to start New York after breaking down overnight Asia; Japanese exporters are credited with starting the slide by offering USD/JPY from the open. Across the board stop loss orders were triggered in all the major pairs suggesting that the USD sell-off was coordinated by the markets and the USD side of the equation was in play rather than the Yen focus of late. Traders note that the sell off was orderly and order flows were consistent with good two-way flows being seen suggesting that real money accounts were active as well as large players, semi-official and sovereign names. If that was the case, then the argument could be made that the world FOREX community have just confirmed a top in the USD is in for these past six months or so, and a more consistent decline is in store for the USD.

GBP rallied through several layers of reported offers easily absorbing them at each level for a high print at 1.9500 even before a small amount of profit taking was seen. Starting New York the GBP is firm at 1.9470 area as traders await the release of US CPI data but given the size of the overnight move additional upside from a weak CPI number may be limited. EURO found the stops we have been looking for above the 1.3260 area and quickly put on weight as shorts ran for the exits; high prints overnight in Europe at 1.3341. EURO has effectively erased all selling pressure evident in the past 12 months and after the next pull back will be technically and fundamentally ready to make new 2007 highs and new lifetime highs.

For those of you still thinking of the EURO as lacking credibility in the trading community or that the EURO is not going to “work”, last nights action was the thickest volume the rate has seen in months and was coordinated across all cross rates. The EURO is the worlds most valuable and stable currency in my opinion and the past 24 hours of trading has been a confirmation that a serious trader should not ignore. Look for the EURO to remain firm near-term and buy the next pullback with both hands.

USD/JPY has fallen back for a low print at 116.50 and continues to sketch out a solid bear pennant in my view, solid two-way trade is evident with the offers dominating for this round. Look for the rate to bounce nicely and look to reestablish new short positions. In my view, the majors will follow through on this strength next week but a bout of profit taking is likely soon. Buy the next pullback and look for the USD to trend lower into Q2.


R3: 1.3480

R2: 1.3400

R1: 1.3340/50

Current Price : 1.3325

S1: 1.3300

S2: 1.3260/70

S3: 1.3220/30

Rate breaks out to the upside as expected and erases the past 12 months of selling pressure, rate set to tackle offers above the 1.3400 area near-term. Large money accounts will be on the bid during the next pullback in my view; look to BUY aggressively on the next dip. Consolidation is likely also and the MA’s need to catch up so expect two-way action into Q2.


R3: 117.60/70

R2: 117.20

R1: 116.90/117.00

Current Price : 116.59

S1: 116.20

S2: 115.80

S3: 115.50

Rate drops to bottom of pennant formation and likely to find support near-term, look for a pullback to fail at the 117.70 area again moving forward and good two-way flows are likely by the cross spreaders. Sell strength in this pair as it is likely the Yen will continue to gain an advantage against the USD during the year. Stops under the 116.20 area said to be large.

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