Morning Forex Briefing

The USD is mixed to start New York this morning after a solid two-way overnight session. Initially firm to better in Asia, traders continued to debate near-term direction of the Greenback and generally kept the majors range bound in moderate volume. Liquidity has been thinner in Tokyo traders say as the fiscal year in Japan winds down and may be contributing to the range bound trade. Demand from Japanese names kept the USD/JPY underpinned in early trade but as interest dried up speculative longs liquidated and in thin conditions the rate dropped into stops on active selling taking the rate to an initial low at the 117.50 area. Reported bids at 117.00 and 117.20 area were challenged later in European trade and the rate is currently off the lows of 117.07 to open firm at 117.25 area.

Tensions with Iran have not spilled into trade in the GBP but some flight to quality concerns were evident overnight as the GBP fell through some technical support at the 1.9640/50 level during early overnight trade for a low print at 1.9597 where bids supported; UK may halt diplomatic relations with Iran until captured British servicemen are returned.

Oil prices are naturally very nervous over potential conflict in the Middle East and that may contribute to the two-way volatility in the USD near-term but should violence break out between Iran and western military it will most likely be a boost to the USD.

EURO remained in established ranges again overnight but did have a bit larger range than yesterday making a brief show into the 1.3370 area before supply was seen by Eastern European names. Traders say the focus has been more on the Yen crosses of late and EURO will continue to trade more subdued.

Today US Fed chairman Bernake is speaking before the Joint Economic Committee and no doubt traders will be looking for clues to the Fed’s next move. Most likely Bernake won’t say anything particularly market moving today and the focus of early New York trade will be the release of Durable Goods data shortly. Traders are not looking for anything surprising from the data and are most likely looking ahead to GDP data due out tomorrow. In my view the USD is consolidating and the majors are still looking at a potential correction near-term. USD strength into the end of the week is likely should flight to quality develop due to the Mid-East situation and along with technical support holding this week I think the USD will rally and provide a great short-selling opportunity soon.


R3: 1.9760

R2: 1.9720/30

R1: 1.9680/90

Current Price : 1.9640

S1: 1.9600/1.9590

S2: 1.9550

S3: 1.9500

Rate continues to consolidate the 1.9650 area with highs and lows contained in previous ranges. Downside breakout looking more likely after volumes dropping the past few days. Look for the break into stops under the 1.9600 area to draw liquidation and potential support at 1.9550 area. BUY into 1.9550 and 1.9500 areas of support.

USD/JPY Daily Futures

R3: 118.50

R2: 117.90/118.00

R1: 117.50

Current Price : 117.17

S1: 117.00

S2: 116.50/60

S3: 116.20

After latest failure to trade above the 118.50 area rate rotates lower to test bottom of bear-pennant formation; upside breakout failure encourages the bears but drop into technical support will draw bids. Should US data encourage the bulls the USD will likely rotate right back to the highs near-term. Support at 117.00 appears firm for now, aggressive traders can BUY anytime.

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