Morning Forex Briefing

The USD is modestly firmer overnight trading in very technical two-way action as the week gets underway. Traders note that no real news is in the market this morning and that the major pairs appear to be trading on follow-through from Friday’s close. Expected to be driving at least some trade today are option expiries for the New York cut; analysts suggest that the USD may be two-sided or suffer a reversal after expiration.

GBP is lower but holding technical support at around 1.9560 area; low print at 1.9569. Analysts suggest that stops are likely building under the 1.9550 area near-term; aggressive traders could be a buyer on a dip into that area but a deeper pullback into the 1.9490 area would be likely on those stops.

EURO has lost the 1.3300 handle in early trade this morning, some stops firing off in Asia on a break of the 1.3280 level; low print 1.3253 before bids were able to contain the break. Traders note that volumes were modest and suspect that late longs from late last week are being squeezed out. Bids under the 1.3250 area likely to create two-way trade in EURO early in the week as the economic calendar remains light for the USD but a major report is still up on Thursday with GDP. Early forecasts for GDP are mixed but look for growth to rebound moderately from estimates.

USD/JPY is firmer into New York at 118.25 finding offers promised to be thick and the rate is struggling at this level ahead of option expiry for a 118.30 strike; high print so far at 118.34. Across the board the USD is building a bit of follow-through strength in the majors but volumes are only moderate so far suggesting that the strength may not be very deep. Traders note that the USD has extended into areas of previous technical support or resistance and a reversal may be likely if US data disappoints this week. In my view, the USD/JPY represents one of the best short potentials on the board.

The issue of the carry trade putting pressure on the Yen is less significant than the issue of how to revalue the Yuan which will certainly over-ride any interest in the carry in my view. Should the USD suffer a reversal near-term, the potential to trade to a new 2007 low is there as sentiment might be changing more aggressively for a weaker USD. Look for the Greenback to continue two-way today and after the option expiry but look for signs of topping. 9:00 AM CDT New Home Sales forecast 995K may provide a bit of fireworks but expect two-way trade regardless.


R3: 1.3320

R2: 1.3300

R1: 1.3280

Current Price : 1.3264

S1: 1.3220/30

S2: 1/3200

S3: 1.3180

Correction from the highs underway, stops layered between 1.3250 and 1.3220 area likely to target 1.3180 on a pullback. Rising 100 bar MA likely to offer support on a break and shorts should cover in that area in my view. Look to go long on a break and scaling from 1.3220 down to 1.3180 certainly an option.


R3: 119.00

R2: 118.80

R1: 118.50

Current Price : 118.37

S1: 118.00

S2: 117.60

S3: 117.20

Rate probing into offers said to be thick at this level and extending to 118.50 area. A retreat to stops rising at the 117.40/50 area likely to keep bearish hopes alive as bear-pennant remains intact; close above the 118.30 area likely to draw liquidation by the shorts. Traders note that option expiries today include a 118.00 strike which is in play. Look for a pullback to keep within the pennant; otherwise a leg higher on stops above 118.50 likely.

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