Morning Forex Briefing

The USD is mixed again this morning as unwinds of the Yen carry trade continue to dominate trader interest. Opening in Asia firm the USD/JPY remained well-bid into European trade after a high print at 117.84 again attracted sellers. Pressure on the GBP and EURO as those Yen crosses continued to be pressured found the USD enjoying a modest boost in solid two-way trade. Once stops were triggered the USD began to move sharply into the start of New York trade and currently the USD is modestly higher against EURO, sharply higher against GBP and Sharply lower against JPY as traders throw the towel in on a difficult trading week. USD/JPY found stops under the 117.40 area and again under the 117.00 handle for a low print at 116.82 before strong bids lifted the rate back over the 117.10 area in solid trade; analysts point out that option defense for 116.70 area is likely as a large strike is set to roll off next week.

Cable is on the lows for the day to start New York, sharply lower for a low print at 1.9429 so far. Traders say a combination of Yen carry unwinds and stops are the reason that GBP has fallen back so hard today but analysts warn that the rate is approaching key support areas at the 1.9380 area and a bounce is likely.
Traders note that CTA-type accounts had stops placed at the 1.9520 and 1.9480 areas.

EURO is also lower but not so much as traders focus on other pairs, low prints at 1.3141 are under near-term support but above the key support area of 1.3080 near-term. Traders look for all the pairs to stage a modest recovery into next week as profit taking is likely to start ahead of the European close and after today’s Michigan Sentiment reading.

I think it is important to note that although the overall trend in the USD is lower and that the majors are currently mixed, the volatility in the USD is quite high due to the focus on JPY carries. Aggressive traders could look for both sides of the markets through the end of the quarter but more conservative or long-term traders need to wait for a USD rally to put out longs again. The Yen carry is not going away instantly and as portfolios get adjusted and economic data continues to come out for the next few months it is possible that the USD may remain in a very broad trading range for several months. I think it is reasonable to look at the overall downtrend as getting some confirmation from the weak USD/JPY but a rally back to the highs will not be out of the question. Look for the USD to firm today.


R3: 1.9550

R2: 1.9520

R1: 1.9480

Current Price : 1.9441

S1: 1.9420

S2: 1.9380

S3: 1.9320

Pair fails at pennant as expected, shorts can be added if close is below the 1.9480 area in my view. Look for a test of the 100 bar MA to draw buyers and a bounce of that is likely; look for a low volume bounce to ADD. Close under the 100 bar MA likely to accelerate drop to 50% fib defense at the 1.9200 area. Fall back to trend line support at 1.9140/50 area a huge buy in my view.


R3: 118.10/20

R2: 117.80

R1: 117.40/50

Current Price : 117.09

S1: 116.80

S2: 116.40/50

S3: 116.00

USD shorts will start to lighten up around the 117.00 area so be mindful of a bounce at current prices, rallies likely to be sold so a test on good volume with close-in stops of the 117.80 area or higher most likely will be signs of a potential reversal. Any rally will be a selling opportunity in my view the question is how high before breaking? Test of 50 bar MA is a huge sell in my view.

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