Morning Forex Briefing
The USD is trading lower to start New York after falling off a bit in late European trade. Initially firm in Asia, problems with the Reuters matching system gave the GBP a boost as the Yen crosses continued to remain a focus for traders but most unable to gain full competitive access until the electronic system was operating fully.
Sterling/Yen was bid higher keeping the majors firm in sympathy and once European trade was under way traders focused on higher-than-expected UK PPI data and Cable rallied into stops said to be resting at the 1.9400/10 area for a high print at 1.9436 before offers capped the move. Technical trading appears to be the rule ahead of economic data for release this week with traders likely to be taking their cue from US data later on Thursday; traders note that with EURO and GBP tracking each other to start New York today the chart-watchers are in control for the near-term. Also higher after stop-driven trade, EURO has advanced on the 1.3200 handle after stops at 1.3160 area triggered for a high print at 1.3184; EURO stable at 1.3180 into early New York trade. Rumors of a 1.3200 option barrier for size is likely keeping a lid on prices but traders warn that stops are likely thick above the 1.3200 area due to the large CTA-type accounts selling EURO last week. Should the markets trade 1.3200 or higher the EURO may have a press for the 2007 highs near-term. USD/JPY is weaker into New York after holding the 118.20/30 area most of the overnight session.
Cross spreading Yen for other rates have kept the Yen under pressure but after the Start of New York sees the USD dropping on active selling into the 117.70 area; traders note that aggressive selling of USD/JPY last week by CTA and Model-type accounts suggests that stops above the 118.60 area of recent highs is a risk but so far the pair remains under pressure. In my view, the Greenback is starting off the weak on follow-through selling and volatility is to be expected. Technical trade is also expected due to the fact that US economic data is light until Thursday leaving the USD vulnerable to near-term two-way action. It is likely the USD will sell-off to technical lows then rally until data suggests more long-term fundamentals will drive trade. Look for the majors to firm up through today and into tomorrow; then rotate the other way Wednesday into Thursday. In my view the set-up for the week is to buy dips in the majors looking for the USD to remain pressured after US data.
USD/JPY Daily
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R3: 1.9490
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R2: 1.9430/40
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R1: 1.9410
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Current Price : 1.9392
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S1: 1.9350/60
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S2: 1.9320
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S3: 1.9300
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Rate finding upside labored after initial stops triggered overnight; 100 bar MA offering resistance at the 1.9430/40 area for now. Close back below the 1.9350 area likely to discourage bullish enthusiasm but stops are most likely further back below the 1.9280 area of consolidation late last week. OK to ADD to open longs, look for a test of the 1.9440 area this week.
EURO/USD Daily
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R3: 118.80
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R2: 118.50/60
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R1: 118.20
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Current Price : 117.72
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S1: 117.40/50
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S2: 117.20
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S3: 117.00
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Rate coming very close to completing 50% retracement of recent down move giving the bears something to work with. Stops triggered above the 118.20/30 area overnight but offers easily capped and close in stops the other way also triggered leaving the rate vulnerable to rotate higher. Look for a mid-range close today.
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Jason
Jankovsky
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