Morning forex briefing
The USD is mixed against the majors
this morning after a quiet Asian session, and a violent European
session. Initially weaker across the board the Greenback has recovered against
the EURO to start New York on the back of a weaker-than-expected German ZEW
business sentiment index. The ZEW posted its eighth straight monthly decline
to the lowest reading since January 1999 suggesting that the economy is not as
robust as some believe in the Eurozone. After posting an overnight high at the
1.2720 area of previous resistance, the EURO came under heavy selling after
the release of the ZEW falling back to the 1.2650 area of previous support.
Traders note that that stops under the rate remain untouched
and like the strong negative fundamental seen last week for the USD (record
trade deficit), today’s negative data was not enough to break the EURO out of
established ranges. Traders note that EURO/JPY came under pressure as well as
EURO/USD but support across the board is holding to start US trade. On the
offer overnight for EURO traders note large Japanese names and semi-official
names; USD/JPY is also lower suggesting that cross-spreaders were unwinding
EURO/JPY after the ZEW report. Comments from Chinese officials also lent
pressure to the USD/JPY pair overnight; PBOC spokesmen stated that China is
committed to an “appropriate†rise in the Yuan value over time and that the
Chinese economy remains “vigorousâ€. The Yuan closed on the tightly-controlled
exchange market at 7.9342; a record high. Treasury Secretary Paulson will be
in Beijing Wednesday for talks with the Chinese which are certain to include
the Yuan exchange rate.
Analysts point out that the Chinese will likely move slowly
if at all so the threat of sanctions against Chinese exports will probably be
effective in moving the Chinese forward to greater Yuan flexibility. Traders
expect any talks to pressure USD/JPY due to the concern that a falling Yen has
had with trading partners. Cable remains under pressure to start New York but
not so much as EURO, GBP holding above the 1.8800 handle in light trade
suggesting that cross-spreaders are active in the sterling side of non-USD
pairs again. Look for the GBP to hold support at 1.8780 before rallying.
USD/JPY Daily
R3: 118.80
R2: 118.20
R1: 117.80
Current Price : 117.56
S1: 117.20
S2: 117.00
S3: 116.80
Pair looking to top in here somewhere, lots of selling
interest to cap the rallies but still residual interest on the bid but that
appears to be fading now. Chine wildcard fundamentals likely to keep the pair
nervous through Paulson visit this week. Look for USD to weaken into stops
under the 117.00 handle; close under there indicates near-term top. Expect
two-way trade until a weak close then long liquidation.
GBP/USD Daily
R3: 1.8920
R2: 1.8880
R1: 1.8830
Current Price : 1.8793
S1: 1.8750
S2: 1.8700
S3: 1.8650
Pair inside range but finding support off of 50 bar MA as
expected; look for rate to remain range-bound along with EURO near-term until
US FOMC meeting tomorrow. Traders heavily focused on the statement and with
the potential for the BOE to raise rates ahead of the Fed cable may be under
upward bias the finish the year. Stops above the 1.8880 rumored to be large.
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