Morning Forex Briefing
The USD is slightly better this morning after a quieter two-sided overnight session. The greenback traded lower against the majors in Asia but found technical trade supporting on the breaks; close-in light stops were reported by some traders. The lack of market sensitive news so far today is contributing to lackluster trading; many traders note that volumes are lighter and market players appear to be somewhat sidelined ahead of the rate announcements due on Thursday and US NFP on Friday.
Cable is slightly lower this morning after dipping on weak UK manufacturing data; forecast a bit higher the drop to +2.5% y/y was seen as GBP bearish. Cable sold off into stops reported to be resting under the 1.9670/80 area and more on the break into 1.9740/50 for a low print at 1.9629 before bids were seen lifting the rate. Analysts say that a close below the 1.9670 area indicates the rate is in the corrective mode and expect further losses. EURO fell in sympathy with GBP also but found support a bit earlier. Some stops were elected under the 1.3280 area but the low prints at 1.3257 held important technical levels analysts say.
EURO is also correcting against the non-USD crosses so many traders feel that the EURO is “tired†at the 1.3300 handle and expect a minor correction at the very least before heading higher at some point. USD/JPY is firm but not aggressively higher from Tuesday’s trade; the rate is stable and about unchanged from the New York close.
USD/JPY has an inside range so far for the day and appears to be under a bit of upward pressure to start; traders feel that the EURO/JPY cross may be lending some support as market players adjust “carry trades†or take profits heading into the end of the year. In my view, today’s action could be considered corrective for the USD and mostly a technical consideration. With the lack of market news until tomorrow’s rate announcement by the ECB (and to a lesser extent the BOE) I think it is reasonable for the USD to remain range-bound and corrective. Look for the USD to cover the same ground twice over the next 24-48 hours but to hold to a mostly higher corrective bias. Should correction pressure remain through the end of week the aggressive traders will have the opportunity to add to shorts.
GBP/USD Daily
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R3: 1.9760
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R2: 1.9720
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R1: 1.9680
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Current Price : 1.9648
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S1: 1.9620
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S2: 1.9580
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S3: 1.9520
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Pair likely in the corrective mode now that a top is in near-term; look for two-way trade and lots of stops on both sides to drive near-term action but with a lower bias. Should rate correct into the 50% fib defense a bounce higher is likely from there. If currently short look for a test of 1.9550 to expose aggressive new selling; add to winners near-there. New highs unlikely before a solid break in my view.
USD/JPY Daily
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R3: 116.00
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R2: 115.40
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R1: 115.20
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Current Price : 114.96
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S1: 114.50
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S2: 114.00
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S3: 113.40/50
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Rate holding inside range day, traders note that importer buying and bids from Japanese banks and investment houses are keeping the rate firm on dips. Should stops be resting above the market at 115.40 area a rally into the 116.00 area likely to be sold near-term if triggered. Resistance at 116.60 likely very solid and a great place to liquidate longs or initiate a short position.
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