Morning forex briefing
The USD is softer to start New York
after a quiet two-sided overnight session that included the rate announcement
by the BOJ to leave rates unchanged. Initially softer to start
Asia, the Greenback dropped briefly on the news for a low print at 119.06
before rebounding to the 119.40 area in light trade. Although the consensus
was widely expecting no change in the rate policy by the BOJ, rhetoric from
BOJ Governor Fukui suggests that the bank is closer to a rate hike than most
analysts have considered. Fukui hinted that the BOJ might raise rates by the
end of the year and that the timing of the move is open.
Traders took this to mean that the BOJ is signaling a rate
hike is coming sooner rather than later and the USD/JPY pair is firming from
the Yen side. Cross-spreaders may decide to unwind a large overhang of stale
longs and the momentum studies are slowing suggesting that the USD/JPY is due
for at least a minor pullback. Overnight news in Europe was scarce and the
majors remained on the quieter side into the New York open. Currently the USD
is softer across the board in pre-report trade; traders note that the minor
reports due out ahead of U. of M. Sentiment are likely to have little effect
on USD trade. The lows may be in across the board for the week in the majors
and many traders are expecting that a lower-than-expected sentiment reading
could spark a round of USD long-liquidation. Noting that the GBP is firm above
the 1.8600 handle after a solid push to the 1.8630 area, traders remind that
speculation for a BOE rate hike remains and that unwinding of crosses could
have a bullish effect on the rate near-term. Support at 1.8560 area appears
firm and buying a pullback may offer the best opportunity for the near-term
trader.
EURO remains firmer also this morning but below important
resistance at the 1.2580 area. Some traders suggest that the EURO will need to
see 1.2600 handle before seeing any major stops placed but also remind that a
rally in cable could easily spill over into EURO as has been the case
recently. Support in EURO is seen around the 1.2530 area of reported sovereign
demand. To end the week the majors appear to have seen the lows for the week
yesterday, look for a short-covering rally in the majors today to close
Friday. Should US data due next week disappoint the USD bulls, the lows for
the majors this month may be in.
GBP/USD Daily
R3: 1.8780
R2: 1.8720
R1: 1.8660
Current Price : 1.8616
S1: 1.8580
S2: 1.8500
S3: 1.8450
Pair beginning to form solid potential base off of support
at the 1.8500 area, resistance likely from the 100 bar MA at the 1.8680 area
near-term, close over the 1.8700 handle likely to encourage the bulls. Cross
spreaders likely to unwind should pair have a close over the 1.8800 area and
challenge 50 bar MA; look for early rally to falter but buying to be seen on
dips. Likely that the lows for the month are in.
USD/JPY Daily
R3: 1.2050
R2: 120.00
R1: 119.80
Current Price : 119.34
S1: 119.10
S2: 118.80
S3: 118.20
Pair likely forming a near term top as the 120.00 area fails
to attract buyers and strong offers ahead of the handle cap the rally. Look
for a pull back to challenge reported demand at the 118.50 area or a bit lower
but stops are said to be building under the 118.80 area. Deeper support at
117.20 area likely to contain any break but pair seems unwilling to trade
higher before some retracement.
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