Wednesday’s forex briefing

The USD is slightly better to start
New York after again spending the overnight session in two-sided light action
ahead of US data due out today.
Even though volumes were light in
Asia the crosses were active with EURO/JPY hitting a new high overnight; flows
were on the lighter side as the corporate holiday Oban holiday continues.
Traders look for a pick-up in volume next week in Asia as the “summer
doldrums” wind down. In the European session action centered on the GBP as
traders awaited the release of the BOE MPC minutes from the last meeting. The
vote was expected to be unanimous for a rate hike but instead the MPC voted
6-1 for a rate change. Traders saw this as mostly bullish for cable and a
brief rally to the overnight highs at 1.8930 area was the result. Cable found
willing offers on technical resistance and the pair fell back easily. Noted
sellers of Cable were Middle-Eastern names and buyers were US names. EURO
continues to trade firm at the 1.2770 area to 1.2800 handle, noted sellers
overnight were CTA type accounts traders say. USD/JPY also had a tight
overnight range and sluggish volumes; traders note a North Asian name on the
bid for USD around the 116.00 area in Asia.

Traders say that CTA type accounts also noted buyers but at
a bit higher level; analysts note that the pair is holding technical support
at the 115.80/116.00 area with lack of sellers on the breaks to test support
suggesting that the market will rally to the top of the range around 117.00
area before trying for downside stops again. All eyes are on today’s release
of US CPI data due shortly. After yesterday’s surprise number from PPI many
analysts have down-graded their release estimates citing a correlation between
the two numbers may suggest a lower CPI and therefore a better inflation
picture. In my view, the CPI core number is the most closely watched of the
indicators right now because the “data dependant” US Fed is seeking to control
inflation rather than stimulate growth at this juncture. I would look for a
solid core number around +0.3 to be considered slightly USD bullish on the day
as expectations are for a lower number and a Fed that waits to raise rates
again. Look for the USD to rally today on bigger US numbers but remember this
is a low volume day so far so volatility may be larger.


R3: 1.9020

R2: 1.8980

R1: 1.8940

Current Price : 1.8905

S1: 1.8880

S2: 1.8840

S3: 1.8800/10

Pair inside range day ahead of US data, overnight news was
slightly bullish for Cable but rally fizzled-out at previous resistance around
1.8940 area on low volume. Stops said to be thick below 1.8880 area, traders
look for a break of 1.8880 to trigger a sharp move sub-1.8840 area; look for
two-way trade and volatility today but a lower close.


R3: 1.2880

R2: 1.2840

R1: 1.2800

Current Price : 1.2782

S1: 1.2740

S2: 1.2700

S3: 1.2680

Pair inside range day, failing at resistance from
yesterday’s high. Near-term support at 50 bar MA and 50% fib number likely to
attract additional buying on any fall-back; pair likely to range trade in
sympathy with GBP as that pair corrects lower. Look for a test of the 1.2700
area near-term to be bought and the 1.2800 area to be sold. Good two-way

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