Morning Forex Briefing

The USD is about a Yen firmer this morning after starting under pressure in Asia.
Traders saw early selling of the USD/JPY by Swiss names taking the rate down to a low print at 115.26 before residual bids began to firm the pair into European trade. “Fast Money” accounts were seen on the bid for USD into European trade likely covering short USD positions trades say suggesting that part of the recent Yen move has been driven by speculators. Although the JPY crosses remain a heavy focus the majors continued to recover against the USD as traders took cues from a recovery in Asian and European stock markets. Analysts note that from a technical perspective the USD has not violated any important numbers the past few days and remains inside established ranges that have paid the Yen carry for the past year or so.

Should the most recent Yen carry traders be taking losses as some suggest the more established and long-term Yen carry traders are not under any real threat until the Yen is above the 110.00 area regularly. That appears to be a way off for recent trade so I think it is safe to say the Yen carry will not remain the focus for the near-term as the “correction” has occurred and has only affected the most recent players. Look for the USD to stage a modest recovery into later in the week when more US data is released.

Cable has firmed overnight as both Sterling/Yen demand emerges in Asia and general GBP demand in Europe keeps the rate firmer. Traders report that close in stops were triggered at the 1.9240/50 area and the GBP is opening in New York at the 1.9275 area with a high print at 1.9308 suggesting that the GBP has a recovery in mind.

EURO is also firm at 1.3105 to start New York with a high print at 1.3132 keeping key support at 1.3080 area intact. Traders also report close-in stops at the 1.3100 area overnight. In my view, the USD is set to trade sharply lower against GBP and EURO into the end of the month; higher against the JPY for an initial correction. All the pairs have allowed for modest give and take but the overall trends are not compromised in my view.

USD/JPY has clearly shown that the path of least resistance will most likely be lower over time and the other majors are quietly building a base for a run at the 2007 highs. In between now and then expect a lot of two-way trade and larger ranges. Aggressive traders can stay long USD/JPY through a correction to the 118.50/80 area before reversing.


R3: 117.80

R2: 117.30/40

R1: 116.80

Current Price : 116.53

S1: 116.00

S2: 115.80

S3: 115.40/50

Pair inside range closing higher argues for a potential correction. Look for violent two-way trade but technical selling at standard fib defense; strong resistance at 118.50 area which is 50% of the 122.00 area to 115.20 area retracement. Stops reported at 116.80 area and 117.20 area, close over the 117.20 area opens the door for a test of 118.00 handle.


R3: 1.9380

R2: 1.9340

R1: 1.9300

Current Price : 1.9272

S1: 1.9240/50

S2: 1.9200

S3: 1.9180

Classic bear-trap in my view, break through previous support then stalls at fib defense on light volumes, look for rate to accelerate the recovery into the 100 bar MA before any serious resistance. Stops said to be close in at 1.9350/60 area and under the 1.9180 area so violent trade is possible too. Close over the 1.9300 area argues for a test of the 1.9400 area near-term.

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