Morning Forex Briefing

Overnight trade in the majors was heavily focused on the Yen crosses as expected after a late rally in US equities lifted the USD higher; equity markets in Asia were firmer overnight lending further support to the USD/JPY.
American banks were seen on the bid in USD/JPY traders say and light buying from Asian names as well but the focus in GBP/JPY remains the Russian interest; again overnight the Russians were seen buying GBP/JPY keeping the pressure on the USD/JPY as well.

Traders note that the interest in the Yen carry remains adequate and in the larger picture the recent strength on the Yen has not taken a significant profit off the table for the larger players but rather it is only those traders who have set carry trades since the first of the year that have had to worry. In my view, the Yen carry has a long way to go as long as the BOJ is taking a lot of time to raise rates. I would look for the USD/JPY and other Yen crosses to remain in a broad trading range instead of developing a significant uptrend or downtrend against the higher yielding currencies. I think the world focus on the Yen carry is premature and the structural defects in the USD are more significant moving forward.

USD/JPY remains firm to start New York with a high print at 117.59 and opens 117.32 area. GBP is higher on cross trading with a high print against the USD at 1.9397 suggesting that buyers are willing above the 1.9350 area of previous resistance. Stops were noted in GBP traders say but not in large size arguing for a pullback to find bids in size. Look for today’s US data to increase volatility in the GBP today as several sides of the trade are apparently active; GBP/USD, GBP/JPY and GBP/EURO.

EURO continues to remain range bound with little activity as traders remain focused on the Yen. EURO high print overnight 1.3235 on lighter volumes but traders note the rate is firm on dips to the 1.3180 area suggesting that the EURO will have larger and larger stops building just outside of recent high/low prints for a violent breakout potential. I think the best potential is higher after stops above the market failed to be in size close-in suggesting that those stops are “bunched” in one area as opposed to layered between several resistance areas. If EURO triggers those stops all at once the speed of an up thrust could be huge. In my view, look to buy pullbacks; sell rallies in USD.


R3: 1.3300

R2: 1.3280

R1: 1.3240/50

Current Price : 1.3216

S1: 1.3180

S2: 1.3150

S3: 1.3120

Rate at significant resistance area, potential double top offering some overhead resistance but more importantly was the lack of stops for size between the 1.3220/50 area. The fallback overnight to the 1.3190 area after a high print of 1.3244 yesterday is a significant range for this pair lately. Buying dips preferred, support at 1.3150 area solid traders say; expect a pullback and volatility on US data today.


R3: 118.00

R2: 117.80

R1: 117.40/50

Current Price : 117.29

S1: 117.00

S2: 116.60

S3: 116.60

Rate is two-way near term with large volatility to remain in my view. Failure to drop through support at 115.50 area argues for a rotation higher to stall under the 118.60 area creating a “flag/pennant” to consolidate the break. Lot’s of residual Yen carry interest so expect dips to be bought. Sell rallies the best strategy in my view; ADD if a break out lower under 115.50 area finds stops in size.

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