Morning forex briefing
The USD is starting the New York session stronger on Monday after a weaker start in Asia. Rallying through most of the European session, the USD is now on the highs for the start of the week with several layers of technical support/resistance now on the horizon for US trade.
Initially weaker to start Asia after Friday’s rally back from lows, the USD saw pressure from US investment banks and offshore funds; probably “black box†accounts. USD/JPY steadied around the lows at 117.20 area but did not make a new low from Friday’s trade last week. Support for the USD started near the end of the Asian session and into early Europe when Japan’s LDP Nakagawa suggested that deflation is not over yet and he is opposed to more BOJ rate hikes; USD rallied to test the 118.00 handle and is currently just shy of offers said to be from exporters at the 118.00 and 118.20 areas.
Cable initially saw strength but failed to trade above Friday’s highs as well against the Greenback; disappointing news from UK PPI data gave traders a chance to liquidate open GBP longs and the rate fell back sharply to make a new low below Friday’s low in early US trade. Traders note that the GBP is vulnerable to topping at these levels due to the large release of US data this week. Should traders view US data this week as USD supportive the GBP could take a harder hit than the other majors for several reasons; analysts note that the GBP is the only majors currency to have scored a new 2006 high during the recent advance against the USD. With non-USD cross spreaders active with GBP a correction could hit Sterling particularly hard due to the fact that a BOE rate hike failed to inspire further buying.
EURO advanced as well on general weakness during Asia but suffered into US trade also; currently holding the 1.2830 area. Traders report that position squaring ahead of US data this week is contributing to some selling pressure. Traders note that a large Asian fund was a buyer but the rate is lower now suggesting that those bids may also have been model/momentum accounts but that has not been confirmed.
 In my view, the USD is gathering strength for one last drive higher before failing into the end of the year. I think the majors have a lot of upside potential for the remaining seven weeks of the year but in order for that push higher to advance; I think the majors have to retreat to bring the late sellers in. Look for a general advance by the USD this week and look for the majors to hold on major established supports.
GBP/USD Daily
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R3: 1.9170/80
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R2: 1.9120
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R1: 1.9080
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Current Price : 1.9049
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S1: 1.9020
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S2: 1.8980
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S3: 1.8910/20
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Pair failing at new 2006 high and lower-low from Friday argues for a reversal day today. Close below the 1.9050 area likely to draw long-liquidation and stops are said to be building under the 1.8980 area with large stops under 1.8950 area. 50% fib and 50 Bar MA both will offer support at 1.8850 area in my view. Close over 1.9120 area needed to maintain up trend in my view.
USD/JPY Daily
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R3: 118.60
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R2: 118.20
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R1: 118.00
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Current Price : 117.78
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S1: 117.20/30
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S2: 117.00
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S3: 116.80
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Pair finding bids under the 117.30 area enough to lift back into reported exporter offers at 118.00 area; note that the long wicks are in each direction suggesting that large traders are squaring off from both sides. 50 bar MA offering resistance as expected, close over the 118.20 area likely to encourage short-covering. Stops both above 118.60 area and below 117.00 area traders say.
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Jason Alan Jankovsky
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