Morning Forex Briefing

The USD followed-through to the downside overnight losing ground against the GBP before finding support ahead of the New York open. EURO and JPY both were more two-sided but still trading as an inside range day. Cross spreaders were active in the Yen pairs as could be expected with the EURO/JPY posting another record high.

Traders remain cautious in the USD despite the overnight action ahead of US FOMC minutes today. Prior to today’s release overseas fundamentals gave the majors something to work with. Strong UK retail data fueled speculation that the BOE will have to consider a rate hike soon boosting the GBP for a high print at 1.9818; bulls reluctant to push their advantage over the 1.9800 handle as the rate fell back to the 1.9780 area on good volume. Trader’s note that option barriers are likely at the 1.9800 area and 1.9825 area and that may be keeping a lid on the rally as the market has a fairly buoyant tone.

EURO remains firm but two-way; making a high print at 1.3441 matching yesterday’s high but failing to attract additional buying. Traders note that option defense at 1.3450 and more at 1.3480 will likely keep the rate capped near-term but warn a risk for stops above the 1.3450 area which could fuel another leg higher. EURO has made three 2007 highs in the past 14 trading days suggesting that there is plenty of good buying under the market and I would not be a short-seller looking for a top as you might not see one for several days. Buying a pullback in the rate is the strategy of choice I think and aggressive traders can look to buy any down close in my view.

USD/JPY is the only rate that is firm against the USD trading in a solid inside range day and in tight ranges. Most action remains in the Yen crosses which have been accelerating in the past few days but USD/JPY remains subdued. Traders note that the USD/JPY may be firm by default as a weak Yen elsewhere is simply spilling into the pair. Solid offers ahead of the option barrier at 119.50 was seen overnight with exporters on the offer above the 119.20 area. In my view the USD/JPY is topping after a good retracement of the 122.00 to 115.50 (roughly) break. Look for the USD/JPY to weaken later in the week. Today’s FOMC minutes will likely be closely watched more so than other times because the economic calendar is so light; look for the majors to have some volatility but the minutes as a whole to be USD neutral. Better data coming Friday.

/USD Daily

R3: 1.9900

R2: 1.9850

R1: 1.9820

Current Price : 1.9770

S1: 1.9710

S2: 1.9680

S3: 1.9600

Lots of support under the market but upside remains limited ahead of the 1.9880 area as traders note liquidation on the rallies by some longs. Look to buy a pullback but for now OK to book profits. Rising wedge formation remains intact and an upside breakout might happen at anytime but pullback is coming so be ready to buy the dip.


R3: 120.00

R2: 119.80

R1: 119.40/50

Current Price : 119.22

S1: 118.70/80

S2: 118.50

S3: 118.10

Rate consolidates gains for another day as an inside range day keeps further gains at bay; offers ahead of 119.50 said to be very heavy and bids at 118.80 said to be large. Close above the 119.20 area likely to encourage the bulls but failure to close above the 119.50 area after running stops will likely encourage a sell-off. Stops under the 118.70 area very large traders say.

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