Jason Alan Jankovsky Morning Currency Briefing Feb 4th
The USD is firmer into early New York after early action in Asia was flat to firmer; most of the action to the upside came in early Europe when technical sellers in Cable and EURO pushed the USD higher helped by the crosses. Traders note that on the dip in both EURO and GBP semi-official and sovereign demand was again seen into the lows from Asian accounts suggesting that the Yen crosses will see some volatility as well.
The BOE MPC kept rates firm and agreed to keep QE at current levels creating a bit of relief rally in the GBP after the rate cleared stops all the way to the 1.5800 handle. Low prints in GBP at 1.5803 before bouncing on the BOE news back to the 1.5860 area in early New York. Aggressive traders can buy Cable for a rally to test the bears closer to the 1.6000 handle near-term. High prints in GBP at 1.5921 may be challenged for a potential reversal should the shorts cover on a lift over the breakdown area of 1.5880/1.5900.
EURO fell through the reported buy zone of 1.3850/80 but found buyers on a deeper dip to a low print at 1.3825; traders note lots of bid interest from shorts and sovereign accounts under the 1.3850 area suggesting that the lows will be rejected. Stops under 1.3850 were absorbed some desks report but the rate is holding near 1.3830 area in early New York.
USD/JPY high print at 91.08 but offers capped the move and the rate fell back to challenge the recent support zone around the 90.60/80 area with a low print at 90.56; traders note that deeper support is 90.10/30 area with bids likely closer to the 90.00/10 area suggesting the rate will correct back before trying again for a solid move over the 91.00 handle. Tech traders remind that the move to the 91.20/30 area yesterday attracted thick offers and any move to the highs will have resistance layered to 91.50/80 suggesting more two-way action before the bears have to back away from offers above 91.00 area.
USD/CHF has recovered back to the 1.0600 handle with a high print at 1.0636 testing the highs from last week but the rate is stalling settling back to the 1.0610 area in early trade. Offers are likely on a move to test the 1.0640/50 area and bids are likely under the 1.0580 area; stops are said to be 1.0550/60 on a dip under the low prints at 1.0579 in Asia.
USD/CAD continues to hold near the recent S/R area of 1.0620/30 area; high prints at 1.0649 are under the important S/R area of 1.0660 suggesting the move to try for 1.0700 again may have a lot of resistance; traders note that a break under 1.0550 is likely to send the bulls to the sidelines because the key reversal from Monday has not been negated yet. In my view, the two-way action overnight and the lift in the USD is likely more posturing ahead of NFP tomorrow.
Estimates are getting more mixed from analysts and with a weaker equities market ahead of the news it is likely that the market is signaling that the news will be bearish for stocks. That said, with a lift in USD into mid-week ahead of the news it is possible we are setting up a “buy the rumor/sell the fact” situation. Bullish USD news may be baked in the cake already and whipsaw may be extreme the next 24 hours or so. Look for the USD to hold these highs and consolidate for most of the day.
Jason Alan Jankovsky
FOREX Analyst and Trader
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