Morning Forex Briefing

The USD is trading mixed to start New York after an uneventful overnight session; traders note that the upcoming US data due the rest of the week is less in focus than the apparent sub-prime lending “crisis” affecting global equities markets. In my view, the past two-days of weakness in global stocks is a huge over-reaction to the potential of a handful of banks or finance companies threatened with failure or regulatory interference. For the most part, people pay for their mortgages and in any economic down-turn there are always some over-leveraged individuals who suffer a financial crisis. Regardless of that issue, someone somewhere benefits the entire economy by buying distressed real estate and making the issuing mortgage lender whole. I think the focus on the potential for failure in the sub-prime market is over-blown and equities represent some great bargains now; naturally the underlying currency will be affected as well providing us with more opportunity near-term.

Overnight the USD responded by remaining firm against the GBP and the EURO while falling off a bit against JPY on additional carry-trade worries. For the most part, the majors are remaining range-bound against the Greenback and traders note that volumes are only moderate while prices are moving inside established areas. GBP fell back to test the 50% fib defense at the 1.9235 area with a low print at 1.9218; well within the recent high/low activity. Traders say

Russian traders were selling the GBP/JPY cross overnight and giving GBP pressure into the low prints ahead of New York trade. EURO is very firm at the 1.3185 area after staying in a very tight range overnight as most everyone was focused on Yen crosses and equities. It appears trader interest is not in EURO near-term but most likely that will change if EURO can make a move for stops said to be thick above the 1.3220 area. USD/JPY the mover overnight in the majors dropping under pressure through stops and technical support for a low print at 115.74 before staging a recovery. In my view, the USD/JPY is a high value buy at this point and I would look to re-establish long positions under the 116.00 handle if you can get them; USD/JPY opens New York at 116.30 area. Trade is likely to be quieter and lower volume today ahead of US data tomorrow. Look for US data to be neutral and the majors to firm.


R3: 117.20

R2: 117.00

R1: 116.60

Current Price : 116.28

S1: 116.00

S2: 115.70/80

S3: 115.50

Pair probing for bids as offers and stops drop the rate to previous support areas, 115.50 area will be a very strong buy in my view, aggressive traders can take a long right here and scale into a break. Close-in buy stops likely for new shorts to be layered above the 116.60 area. Close over 117.00 area likely to cause a lack of interest due to volatility; look for a higher close today for a hook reversal pattern.


R3: 1.3280

R2: 1.3250

R1: 1.3220

Current Price : 1.3189

S1: 1.3150

S2: 1.3120

S3: 1.3100

Rate holding firm at 1.3190 area just ahead of rumored stops at 1.3220 area; inside range day today likely not to last so look for a bit of a pullback; aggressive traders can initiate longs anytime as it is very likely the stops will be tried for at least one more time. Fall back likely to be bought anyway so look for higher prices near-term. Close over the 1.3220 area will fire the bulls.

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