Jason Alan Jankovsky Morning Currency Briefing Feb 3rd

The USD is recovering from overnight losses as New York gets underway, earlier Asian trade saw the Greenback follow-on lower from Tuesday’s weaker action with all pairs reaching to previous tech levels before reversing. At the top of the rumor mill overnight was the evacuation of Gatwick airport in the UK but that was overblown as traders reacted by selling GBP into highs creating some volatility; weaker UK PMI data offered the bears something to work with and by the start of New York the higher action had been erased and Cable is about unchanged to start early NY trade.

EURO traders continued to watch the Greek situation fairly closely but fixed-income traders note that bond spreads are narrowing again this morning suggesting that despite rhetoric and denial from both the Greeks and the EMU the worst of the situation is likely over adding a bit of lift to EURO. Ahead today is a lot of information on the US jobs front and traders are bracing for surprises in the Challenger and ADP reports; most expect the recent strength in the USD to continue but warn that lot’s of tops were seen recently and the greenback is already correcting lower this week.

GBP low prints in Asia at 1.5965 area being challenged in New York after the rate reached a high print in early Europe at 1.6072 before reversing; PMI was cited as the main motivator for the reversal with some desks saying model and macro account demand cited for the lift.

EURO low prints at 1.3945 saw a steady climb return as the rate slowly lifted into stops known in the 1.3980 area for a high print in two-way action eventually at 1.4028 before stalling. Traders note the usual suspects on the highs with an Asian sovereign also listed as conspicuous sellers.

USD/JPY saw early pressure from cross-spreaders dropping the rate to a low print at 90.06 before rebounding, exporters on the offer at the 90.50 area capped the bounce but the rate extended in late Europe for a high print at 90.64 with offers expected again on the approach to the 90.90/91.00 handle. Traders warn that stops are building above the 91.10/20 area and if the shorts can’t break the rate under the 90.00 handle a rush to exit might result.

USD/CHF slowly ground into stops under the 1.0520/30 area extending to a low print at 1.0496 before bouncing; traders note more stops likely under the 1.0480 area. High prints at 1.0570 in early Asia drew sellers ahead of 1.0580 suggesting the rate is done with the 1.0600 handle near-term.

USD/CAD had a slow grind into stops under the 1.0550 area but bids absorbed easily for a low print at 1.0544 before regaining the 1.0580 area; high prints at 1.0591 making for a tight range suggesting a “wait and see” attitude ahead of US data. Traders warn that the technical reversal seen Monday is lacking enthusiasm for a correction; a lift over the 1.0600 area may result in a short squeeze.

In my view, the USD is correcting from the overbought condition seen into last Friday but the two-way action suggests late buyers into technical dips. I think the best course of action today is to fade a rally if we get any additional USD strength around the news. Look for the Greenback to whipsaw on the news as employment is being closely watched.

Jason Alan Jankovsky

FOREX Analyst and Trader

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