Morning Forex Briefing
The Greenback is marginally higher this morning after a solid overnight session on the buy side, some economic reports and technical considerations driving the USD higher into resistance again.
Early in the Asian session the EURO came under residual follow-through selling after failing to hold the 1.3000 area in New York on Tuesday. Traders note that large stops were elected on a breach of the 1.2970 area driving the rate to the 1.2953 low prints before bids emerged; traders note that model and momentum accounts were seen selling on the break and likely liquidating early longs. Volumes were larger some traders say suggesting that the 1.2970 area is a pivotal area for both sides and technicians remind that the 1.2950/70 area is the previous 2006 resistance area prior to a strong move to new 2006 highs.
EURO may have completed a test of the breakout and now is technically ready for another move into new high prices against the USD. Cable was initially tracking EURO lower into early European trade but holding above the 1.9350 area and firmer against the USD for the week but a larger-than-expected UK trade deficit drove the GBP initially lower for a low print at 1.9341 where stops were elected. Finding bids in that area the rate recovered to trade above the 1.9400 handle rather quickly but remains two-sided ahead of US data this morning.
USD/JPY is holding steady with large offers capping any remaining USD advance; traders note that large real-money names, a US investment house and Japanese names on the offer ahead of 119.50 area overnight suggesting the rate will really struggle hard to rise past the 119.67 previous high and most likely will not penetrate the 119.80-120..00 area where additional option defense is expected. In my view the USD is continuing to attract aggressive selling on each new attempt at a high price and is continuing to sketch out a significant top. I would look for today’s Balance of Trade data to disappoint the USD bulls and the Greenback to falter on any attempt to score additional highs against the majors. Look for the grinding higher action to give way to sideways trade and lighter volumes after the report this morning and tomorrows rate announcements and statements to give the USD bulls a reason to quit.
GBP/USD Daily
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R3: 1.9500
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R2: 1.9450/60
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R1: 1.9420
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Current Price : 1.9376
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S1: 1.9340/50
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S2: 1.9300
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S3: 1.9240/50
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Pair continues to respect the 50 bar MA as support, trading higher again overnight and bouncing back from underneath after aggressive selling on disappointing news. The aggressive rebound after the break into stops suggests that willing buyers are available under the rate and above the 1.9250 area for the pull. Look for a rally near-term as late bears bail this week.
USD/JPY Daily
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R3: 120.00
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R2: 119.80
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R1: 119.50/60
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Current Price : 119.34
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S1: 119.00
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S2: 118.80
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S3: 118.40
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Rate continues to show signs of topping as sellers emerge on rallies again at the 119.40 area or so; large names this time around suggest that long-term players like this price area for shorts. Look for a firm pullback this week and the highs for the month may be in. Rate has spent 98% of it’s time the past year under this area; very low-risk sell in my view. Stay short; aggressive traders can ADD or PLUNGE.
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Jason Jankovsky
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