Morning Forex Briefing

The USD is trading mixed to start New York after a two-way overnight session that saw the JPY crosses again the most active on the board. GBP/JPY saw selling again to trade to a new weekly low in European trade with traders saying the same Russian names on the offer as yesterday; low prints in the rate at 225.09 to start New York. USD/JPY is also lower this morning after basing around the 117.40 area for most of the session but finally concerns over how China will diversify their FX reserves eventually pressured the rate into stops under the 117.20 area; low prints at 116.64 as aggressive traders also sold into the break traders say. USD/JPY has completed a retracement of the recovery and is now poised for further gains analysts say but offers appear to be layered above the market suggesting that the rate will have a tough time rallying past the overnight high. In my view, the USD/JPY is best sold on strength as the break from the 121.00 area is the “warning shot” that the USD is likely to loose ground during the next several quarters.

GBP is steady but off the overnight highs as the GBP/JPY cross has kept the pressure on the GBP side of the equation; Cable just under the 1.9300 handle to start New York and on lighter volumes. EURO is remaining the firmest in my view; trading up to the 1.3200 handle yesterday and holding just under the 1.3190 area overnight with little range; traders say the EURO appears to be testing the bears resolve to hold shorts as offers are consistently being eroded as the pair grinds a bit higher and feels “buoyant”.

German ZEW data out overnight Europe was a bit higher than expected giving the EURO a boost but not quite enough for a try into stops said to be layered in the 1.3210/20 area; high print ahead of New York at 1.3197. Traders say that the JPY crosses keep the focus off the USD pairs but EURO and GBP both are solidly firm at current levels despite the pressure seen elsewhere. In my view the USD is setting up to leg lower near-term. Regardless of the JPY crosses and how they are correcting, the USD is still on the defense the past several months and the current period of consolidation will lead to lower prices I believe. I would look to ADD to open long EURO and GBP positions ahead of the US data at the end of the week. Look for the USD to weaken into the 1.3220 area in EURO and the 1.9400 area for GBP.


R3: 1/3280

R2: 1.3250

R1: 1.3210/20

Current Price : 1.3185

S1: 1.3150/60

S2: 1.3120

S3: 1.3100

Rate has inside range “doji” star formation so far on the day suggesting a point of indecision ahead of US data later (?). ZEW data supports pair but new highs into reported stops needed to further the bulls’ case near-term; stops said to be in size above the 1.3220. Close below the 1.3150 area argues for weakness and a test of the 1.3100 area but firmness of late shows as “but the dips”


R3: 118.40/50

R2: 117.80

R1: 117.20

Current Price : 116.81

S1: 116.60

S2: 116.00

S3: 115.50/60

Volatility likely to increase as Yen crosses continue to dominate near-term sentiment, pair completes fib retracement and is likely to remain two-sided near-term leaving shorter timeframe traders with lots of opportunity. Stops said to be layered under the 116.40 area but bids also making for chop likely on further weakness. SELL rallies best strategy in my view.

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