Morning forex briefing
The USD is slightly weaker from Friday’s closing levels to start New York after a firmer start in Asia overnight; traders note that technical-type trading appears to be the rule with only minor reports due out the next few days. In Asia, the USD got a little bit of early pressure from stronger than expected Japanese Industrial Production data but on the break to lows remained inside Friday’s range. Importer bids near the lows kept the rate firmer into the start of European trade where a US custodial name was also on the bid and lifted the pair into the overnight highs at 117.60 area. Analysts note that the near-term studies are appearing bearish and suggest that a break to 116.60 area cannot be ruled out; stops said to be building around the 117.00 area just under Friday’s lows.
Cable has rallied into US trade clearing out reported stops at the 1.9010 area above Friday’s highs but resting offers have capped the move at the 1.9020 area; analysts are noting also that GBP does not appear overbought near-term and caution that a further rally to the 1.9080 area or above cannot be ruled out.
EURO is also firmer but off its Friday highs; inside range day so far suggesting that EURO may have some upside pressure but is also finding offers near the 1.2750 area. Across the board the USD is weaker and tone remains neutral to heavy trader’s say; without a lot of market-moving news until later in the week it is likely the USD will see technical trade and two-way action. In my view, the USD is beginning to resume its overall bearish multi-year trend and with the recent weakness seen as we head into the close of the month it is possible the highs for Q4 are in. I think it is time to begin your USD bear campaign in earnest. Look to sell USD on strength as we close out 2006. Long-term fundamentals will start to pressure the Greenback as we start 2007 so it is advisable to look to lead the market and establish a base position if you can. Look for solid two-sided action early this week but the USD to fall back net by Friday.
USD/JPY Daily
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R3: 118.40
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R2: 118.00
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R1: 117.60
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Current Price : 117.25
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S1: 117.00
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S2: 116.60
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S3: 116.20
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Pair an inside range day but is under pressure early to start the week; good Japanese fundamentals continue to inspire speculation that the BOJ will raise rates sooner than expected. Stops said to be building under the 117.00 area and layered to 116.60 with bids mixed in; analysts note that the hourly studies appear bearish so a two-sided break to 116.10/20 area can’t be ruled out. Offers at 117.80.
USD/CHF Daily
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R3: 1.2630
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R2: 1.2580
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R1: 1.2520
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Current Price : 1.2477
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S1: 1.2440
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S2: 12380
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S3: 1.2320
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Bulls see the potential for a technical break if up channel is violated under the 100 bar MA. Expect a rush of selling into objective at the 1.2200 area where fib retracement bids will likely surface. Potential change in trend sentiment is developing so look for three solid closes under the 1.2400 area to add fuel to the bears. Offers at 1.2580 and 1.2630 areas.
Please see www. ProEdgeFX.com for details
Jason Alan
Jankovsky
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