Morning forex briefing
The USD is mixed to start New York this morning, lower against Cable and Euro but higher against Yen. Volumes are modest traders say as the markets prepare for a US holiday and a short week. Starting firm in Asia, the USD began to loose ground against the European currencies as comments made by ECB president Trichet were seen as EURO supportive.
The G20 meeting over the weekend provided little help in either direction as comments from officials appeared to be “more of the same†with one exception. BOJ head Fukui remarked that there was no further interest in seeing the JPY depreciate and that the BOJ was watching closely the scenario of a sustained shift in risk control as the US economy heads for a soft landing and the Japanese economy begins to advance. Analysts feel that the BOJ will act quickly with a rate hike when the time is right and that the signal for a rate hike in December is not exactly clear. Should the BOJ hike rates in the next few weeks the markets will need to price that in unexpectedly suggesting that volatility in the USD/JPY pair may increase in the days ahead. Market players are still looking for a BOJ rate hike in Jan/Feb 2007 at the soonest.
Cable opened softer and dropped a handful of pips as the week got started but is recovered to start New York; M & A activity is credited with keeping the rate firm as the NASDAQ exchange has made a bid to buy the LSE. EURO is firm above the 1.2830 area in lighter trade and has tackled supply at the 1.2840 area with a high print at 1.2852 before falling back a bit; traders note that IMM data shows some Spec longs pared positions in the recent report but a net rise in EURO longs from earlier in the year suggest that the rate has potential to look for offers in the 1.2880 to 1.2900 area near-term.
USD/JPY is higher in lighter trade as well but has met Japanese exporter interest at the 118.00 area once again capping the residual buying seen recently. The fall back in the rate on Friday suggests that the pair may be close to topping and light volumes into the high can’t be argued with despite the holiday conditions. In my view, the USD is range-trading as expected and will likely cover the same ground twice near-term. Look for the Greenback to bottom at technical support previously established and rotate higher for 24-48 hours with the exception of USD/JPY. Look for that pair to languish without direction but weaker tone.
USD/JPY Daily
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R3: 118.80
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R2: 118.50/60
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R1: 118.20/30
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Current Price : 118.02
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S1: 117.80
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S2: 117.40
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S3: 117.10/20
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Offers said to be layered thickly above 118.50 area with stops building as well layered to 118.80; exporter offers will likely make any advance slow-going and the spec bulls are getting fewer in number IMM data says. Support at 117.10/20 said to be firm with stops likely under 117.50 area. Trade should remain subdued during holiday week but look for a sell-off at some point near-term as USD ranges.
USD/CHF Daily
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R3: 1.2550
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R2: 1.2500/10
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R1: 1.2450
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Current Price : 1.2398
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S1: 1.2360/70
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S2: 1.2340
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S3: 1.2300
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Pair approaching tech support at 50% fib defense of recent strength; stops likely below 1.2300 area but expect a technical bounce. Failure at established up channel support is seen on everybody’s charts so expect some volatility as technical traders stop-out weak longs. Target objective remains the 1.2200 area for shorts. Look for a weak close during holiday week.
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Jason Alan Jankovsky
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