Morning Forex Briefing
The USD is mixed to firmer this morning coming into New York higher against the EURO, weaker against the GBP and steady against the JPY.
Traders note that post-FOMC trade for the Greenback has been subdued with mostly appetite for the Yen crosses keeping everybody’s interest. USD/JPY is firm while other Yen crosses are higher but traders warn that the USD/JPY has strong resistance at the 118.00 area and a bit higher suggesting that the rate will remain under pressure near-term. Clearing offers above the 118.20 area may take work some traders say and although stops are resting above there the fact is stops are also building under the market and those may prove to be more tempting. Analysts note that the USD/JPY is still inside a very sound bear pennant formation along with Fib defense and suggest that rallies are likely to be sold but dips may not be bought as aggressively leaving the rate vulnerable to a downside correction.
Cable is higher to start New York after starting higher in Asia. Holding gains until the European open the GBP rallied initially on better-than-expected retail sales data and scored a 1.9730 high print before backing off a bit; traders say volumes are modest. UK CBI data was next and traders saw a slight pop back to the highs but offers appear to be willing at the 1.9700 handle and cable continues to base just around the 1.9690 area.
Traders’ note that the GBP/JPY cross has rallied into key resistance at the 232.20 area and suggest a pullback is possible to end the week. In my view, the USD has made its move for the week and the rest of the next 48 hours should be consolidation or retracement. I think the upside attack on new highs by the EURO and the GBP came as a bit of a surprise to some traders and a bout of long-liquidation is likely heading into the weekend.
The US Fed’s policy statement yesterday made it clear that the Fed is waiting for additional data before moving rates either way. With inflation basically under control the risk for lower rates in the US seems to rest with the housing markets. Growth appears solid so I would argue that the USD will be more sensitive to housing data the next few releases. Friday could be a “surprise†day for the markets; look for the volatility heading into the report and should the data be “as expected’ a bit of short-covering in the USD.
GBP/USD Daily
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R3: 1.9800
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R2: 1.9760
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R1: 1.9730
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Current Price : 1.9687
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S1: 1.9620/30
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S2: 1.9580
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S3: 1.9520
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Rate scores the 1.9700 handle but volumes were modest traders saw and the initial failure at the high is a concern for bulls. Look for the pair to finish as a “doji†star top today and potential for a correction is rising. Aggressive traders can SELL GBP. Stops said to be building under the 1.9620 area close in but big stops said to be back at 1.9550 area. Offers extend to 1.9750 so upside may be labored.
USD/JPY Daily
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R3: 118.20
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R2: 118.00
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R1: 117.80
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Current Price : 117.55
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S1: 117.20
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S2: 117.00
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S3: 116.80
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Rate continues to respect major bear-pennant formation, traders note offers above the 117.80 area enough to contain upside for now. Stops building outside of pennant with the risk skewed lower. Stops under 116.80 likely to be thick and risk is for a downside break to be measure to a new low for 2007. Aggressive traders can SELL top of pennant but breakout will make the trade.
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Jason
Jankovsky
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