Morning Forex Briefing
The USD is mixed again this morning as Yen carry unwinds continue, most Yen crosses taking a beating overnight. GBP and EURO are lower against the Greenback as pressure from the Yen crosses lifts the USD by default and across the board traders report heavy stops as the pairs slide. Adding weight to the EURO this morning is the weekly COT report showing that speculators increased their net long futures positions to a record +102,598 contracts as of February 27; traders note that stops layered down to the 1.3080 area have been lending good volumes to the slide lower overnight. Bids are expected to support the EURO around the 1.3050 area traders say and no doubt that the move since last Tuesday has washed out the weak longs leaving the rate ready to bounce.
Cable has fallen to the 1.9200 handle with long-term support expected at the 1.9150 area traders say but without a significant show of bids the rate is vulnerable to the next level near the 1.9100 handle analysts say; both in EURO and the GBP traders note option-related defense on the bids suggesting that the end of the slide is near.
USD/JPY remains in focus again and now that the USD has shed 6% of its value against the Yen it is reasonable to expect a solid bounce although traders warn a bounce was expected 200 points ago. In my view, despite the USD slide against the Yen, the greenback has a strong potential to slide against the EURO and the GBP in the coming weeks as we close out Q1 2007 and resume the overall bear trend for the USD.
The EURO and the GBP have completed a solid retracement while in a major bull market against the USD and despite the focus on the Yen crosses the structural deficiencies that face the USD have not changed in the least this past two weeks. I think it is wise to focus on the bigger picture and remain settled on overall USD weakness moving forward. Coming up on Friday is potentially USD weak data and between now and then the markets are facing thin economic data leaving the rates to trade technically in my view. You need to buy support in the EURO and the GBP this week and those numbers are at or near the traded lows this past 24 hours.
USD/JPY Daily
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R3: 116.60
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R2: 116.20
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R1: 115.80
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Current Price : 115.57
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S1: 115.20
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S2: 114.80/90
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S3: 114.60
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Rate now completing a 50% retracement from 2006 lows to 2007 highs, significant numbers for the USD bulls this morning. Although sentiment remains bearish and liquidation of Yen crosses continues, the rate has a bounce coming. Again, buyers can cautiously step in at the 115.50 area or better but expect volatility.
EURO/USD Daily
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R3: 1.3180
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R2: 1.3140/50
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R1: 1.3100/10
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Current Price : 1.3081
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S1: 1.3050
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S2: 1.3020
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S3: 1.3000
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Rate approaching a 38.2% correction from the attempted highs and the channel bottom support zone, stops driving trade into the 1.3080 area suggesting that the record long position just had a shakeout. 50 bar MA will offer support and a buy off that area is a strong one in my view. Look for the pair to rotate higher this week after completing this pullback. .
Please see www. ProEdgeFX.com for details
Jason
Jankovsky
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