Morning forex briefing
The USD continued to firm overnight
in solid two-way trade, posting slight gains against the major
pairs with the exception of Yen. As expected, the BOJ held rates firm and
Governor Fukui again made clear that the central bank is moving “slowly†on
the rate front. Comments made during the press conference after the rate
announcement also suggested that the exchange rate picture is not a strong
concern but that FOREX will be discussed at the upcoming G-7 meeting in
Singapore next week.
Traders note that although the USD traded higher against the
EURO and Cable; no real follow-through was seen and both pairs are off their
lows after clearing out light stops. Still higher than the Thursday close, the
USD is marking time in quiet trade at the start of New York as traders
continue to wait for additional news to position on. Volumes have been patchy
overnight suggesting that the current price of USD has given both the bulls
and the bears something to consider. Many desks are saying that they expect a
round of long-liquidation in the USD to end the week as open shorts have had a
good run and late shorts aren’t seeing a lot of potential should the lows hold
for today.
Overnight, cable started firm but fell off as technical
traders sold looking for follow-through; low print at 1.8684 before bids at
that level absorbed light stops under the 1.8700 handle. EURO also weaker but
only managed a low print at previous support; 1.2695 bids absorbing light
stops under 1.2705. Both pairs are higher and trading back above the figures
to start New York. USD/JPY remains the weaker pair on the board as speculation
that the falling Yen will be the topic of discussion next week at the G-7
summit. Traders note that volumes were not impressive given the BOJ meeting
but after the rate announcement and subsequent press conference, the pair
eased back to trade at the low end of the range; currently to start New York
the pair is firm at the 116.30 area. In my view, the USD is about out of
breath at this high. Lot’s of long positions are open and traders have seen a
sharp rally in a short time-frame; some of those longs will bail. I think a
short covering rally in the majors can be expected today. Next week lot’s of
US data and should that data argue for no more rate hikes by the Fed, a sharp
USD reversal is likely.
GBP/USD Daily
R3: 1.8880
R2: 1.8820
R1: 1.8740
Current Price : 1.8702
S1: 1.8680
S2: 1.8620
S3: 1.8550
Expect pair to gain support from 50 bar MA for at least one
bounce. Traders note that volumes into the lows were not large and only light
stops were elected under the 1.8700 handle suggesting that the selling
interest is about done near-term; look for sellers to cap a rally around the
1.8880 area. USD remains weak and the uptrend is still in force so this may be
the day to get long sterling.
USD/JPY Daily
R3: 117.40
R2: 117.10
R1: 116.60
Current Price : 116.31
S1: 116.00
S2: 115.50
S3: 115.00
Pair continues to fail at resistance near the 116.80/117.00
areas; look for continued pressure and a sharp break as traders continue to
liquidate on rallies. Return to the bottom of the range around the 114.00 area
is a distinct possibility should sentiment further increase for a stronger Yen
after the G-7 meeting. Keep you eye on China for rhetoric next week and a move
the week after.
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