Morning Forex Briefing
The USD is mixed to start New York this morning, lower against the Yen but higher against the GBP and EURO. Starting in Asia unchanged-to-weaker, the USD saw limited and low-volume two-way trade in Asia as traders chose to wait for data due from the US and light data due from Europe.
European trade continued quiet until the release of Eurozone inflation data showing below-expectations CPI data at 1.7 y/y below forecasts for 2.1 y/y suggesting that the ECB has inflation under control and no more rate hikes will be needed near-term. Traders sold EURO down into stops under the 1.2950 area for a low print at 1.2924 before bids lifted the rate back above the 1.2950 area on recovery. Traders say semi-official and sovereign names were seen on the break below the 1.2950 area. Only a few minutes later UK Consumer Confidence was released a bit better than expected showing a rise from -8 to -7 for the month; GBP sold off on the news initially in sympathy with EURO as cross spreaders unwound Yen carry trades but once the mildly supportive news was released the GBP was already into close-in stops along with EURO. Traders now see two-way trade to continue under previous support until at least the release of US data starting with GDP in about an hour.
USD/JPY is lower as exporter offers and official name sales keep a lid on the rate under the 121.80 area. Traders are looking for a test of the 121.00 area near term and stops are said to be quite large under the 120.80 area also. In my view, today could be a very big day for the USD one way or the other as traders decide exactly how much potential the Yen carry trades have moving forward into G7 meetings and the changing interest rate picture. USD bulls are certain of a price advance as hawkish rhetoric continues to come from the Fed but USD bears remind that the Interest Rate situation is not the only card on the table as the China Yuan situation comes to a head this year. All the pairs are at some critical price levels this week and it looks as if a violent next few days are possible. Look for one-way trade to develop in the USD today after the FOMC rate announcement. I look for the USD to weaken into the end of the week.
USD/JPY Daily
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R3: 122.20
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R2: 122.00
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R1: 121.80
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Current Price : 121.42
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S1: 121.00/10
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S2: 120.80
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S3: 120.50
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Rate showing signs of topping in my view, testing last Friday’s opening range is significant due to the rejected high after that. Stops said to be quite large under support at 121.00; look for a test of that on USD neutral data today. Close below the 121.00 area argues for a near-term pullback. Offers said to again be thick on the approach to 122.00 area or higher.
EURO/USD Daily
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R3: 1.3020
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R2: 1.3000
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R1: 1.2980
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Current Price : 1.2952
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S1: 1.2920
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S2: 1.2900
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S3: 1.2880
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Pair continues to hold a test of the previous breakout area and 50% fib defense of recent rally into highs. Test of offers at 1.3000 area likely today on USD neutral news in my view; traders are looking for a breakout higher near-term I believe. Support under the 1.2900 area said to be all official suggesting that any residual sellers on stops will be head-faked.
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Jason Jankovsky
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