Morning Forex Briefing

The USD lifted into areas of reported resistance overnight this morning and continues to remain buoyant at the start of New York trade. In Asian trade, the Greenback opened unchanged initially but reported comments from BOJ governor Fujii suggesting that the BOJ is under no timetable for rate hikes softened the YEN a bit and the USD rallied into highs supported by weaker-than-expected Japanese Retail Sales and rumors that the G7 will not discuss Yen weakness next month. Finding stops as expected at the 121.80 area the rate rallied to challenge offers at the 122.00 area and above. High print at 122.20 was capped by a large Asian Sovereign name traders say, large supply was seen above 122.00 area some desks report suggesting that either option defense or FX reserve diversification was seen at 122.00 and above.

Cable remained firm into European trade and New York, supported in part by the stronger-than-expected UK CBI consumer numbers showing the best consumer sales in over 2 years; GBP rallied to the 1.9617 high print before capping sales by cross spreaders stopped the advance. Rate is firm on a rotation into the lows near 1.9560 and traders feel confident that the rate will hold firm for today ahead of US data later in the week. EURO is firm also trading to a high print of 1.2930 and remains above the 1.2900 handle in two-way trade; analysts note that the EURO is firm on the 100 day MA which argues for a rotation higher into the top of the recent range. Studies are neutral in EURO while other pairs appear overbought for the USD suggesting that should a USD correction happen near-term the EURO will likely remain inside existing ranges while the other pairs correct into resistance.

In my view, the USD is continuing to extend into overbought readings and a correction is likely ahead of the Wednesday FOMC rate announcement and GDP data. Most traders and analysts agree that the recent USD strength against the Yen is more an issue of Yen weakness and cross-spreaders. Should the Yen rally to correct the massive oversold position and force the cross-traders to cover their carry trades, the USD will come under severe selling pressure taking all the majors with it. This Wednesday could be a catalyst for a USD correction so I advise a short USD position heading into the end of the week. Look for the USD to remain range bound for the early part of the week and then weaken after Wednesday.


R3: 1.2980

R2: 1.2960

R1: 1.2930

Current Price : 1.2916

S1: 1.2900

S2: 1.2880

S3: 1.2820

Holding 100 bar MA technically positive and argues for a test of the upside range. Offers said to extend to 1.3050 along with stops so expect a lot of chop and two-way action into Wednesday. Break below the 1.2880 area likely to expose stops close-in and analysts warn a close below the 100 bar MA is a bearish continuation signal. No real solid news until Wednesday so volumes should be light.


R3: ?

R2: ?

R1: 122.20

Current Price : 122.00

S1: 121.70/80

S2: 121.50

S3: 121.20

Pair has a 200 pip range in less than 72 hours in lighter volumes suggesting volatility is rising and small money accounts might be active. OK to short anywhere over the 121.50 area with shorts over 122.00 ideal. Look for a rotation lower and long tails suggesting multiple time frames active. Rally could be a “head fake” bull trap.

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Jason Jankovsky

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