Morning forex briefing
The USD is sharply higher against
the EURO and GBP but lower against the Yen in early New York trade
after starting the overnight Asian session weaker. Initially firmer on
follow-through retracement pressure from late Wednesday, the Greenback
continued to weaken into European trade until the BOE announced that rates
will be left at the current 4.7% refi rate. Traders liquidated early GBP longs
and close-in stops were triggered taking the rate to new lows for the week at
1.8850 area where larger offers were said to be waiting.
Cable proceeded to reverse hard from Wednesday and currently
is on the lows against the USD at 1.8730 area. Bids are said to be layered
down to 1.8680 but general mood remains heavy traders say. EURO is tracking
GBP lower as well, finding stops under the 1.2770 area and under 1.2750 area.
No real news supporting the move traders say but the pressure from non-USD
cross-spreaders is apparently still evident as EURO/JPY and EURO/GBP pairs
continue to liquidate from life-time highs seen earlier in the week. USD/JPY
is firmer against the weakness seen in the other pairs, rallying up to the
117.00 handle briefly in early Asian trade but breaking hard on speculation
that the BOJ will raise rates this week. Analysts see almost zero chance of a
rate hike this particular meeting but are seeing the BOJ raise rates again in
Q1 2007.
USD/JPY is passing through support in early New York at
116.30 area and finding light stops under 116.20 area. In my view, the USD is
continuing to complete a retracement before heading lower later in the year.
Looking for a resistance area may offer several attempts to short the USD on
this rally but the speed of the breakdown in the majors along with large moves
in multiple pairs being inverse related suggests that the volatility and
direction is not a “secure’ move but a liquidating move by weak hands. If that
is the case, the opportunity to sell USD this week might offer the best prices
of the remaining part of this year.
GBP/USD Daily
R3: 1.8880
R2: 1.8820
R1: 1.8780
Current Price : 1.8742
S1: 1.8720
S2: 1.8620
S3: ?
Pair breaking through support at 1.8820 on stop-driven trade
suggesting a liquidation break. Expect 50 bar MA to offer near-term support
but if weak longs are still holding after today, a further drop into remaining
stops is likely. Look for a recovery to end the week as early shorts cover and
professional buying emerges.
USD/JPY Daily
R3: 117.20
R2: 116.80
R1: 116.60
Current Price : 116.23
S1: 116.00
S2: 115.80
S3: 115.40
Pair reversing yesterday’s gains overnight but volatility is
huge suggesting that lots of people getting whipsawed, close below 116.00
handle will likely cause longs to liquidate. High prints above the 117.00
handle a surprise but exporters took advantage of that and sold the pair into
stops said to be at 116.40 area close-in. Look for continued weakness.
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