Jason Alan Jankovsky Morning Currency Briefing Feb 8th
The USD is off to a quiet start this week trading in a tighter range to start Asia; a light economic calendar for today likely to keep the focus on technical levels most desks are reporting. A late lift in the majors Friday afternoon as US equities climbed back above unchanged seen as corrective with sell orders said to be layered above the overnight ranges in most pairs as the Greenback consolidates near the top of last week’s range.
The G-7 communiqué had little to offer in the way of new information and for the most part was about as expected. Some discussion of the China Yuan exchange rate was expected but no official position from the attendees was offered. Threats by the Greek civil service union to join the general strike to protest the government’s new austerity program later in the month helped to widen out the Greek/German bond spread putting some downward pressure on the EURO taking Cable with it; but both pairs are holding within overnight ranges. Friday’s COT data noted a record short position in EURO futures suggesting the rate is oversold and ready for a correction higher; traders expect any correction to meet solid offers somewhere on the 1.3700 handle as the sentiment remains “sell rallies” in EURO.Overnight equities were mixed in Asia and flat in Europe; DJIA futures also flat in pre-opening trade.
GBP high prints at 1.5639 met tech sellers and the rate returned to unchanged in early New York; low prints in Asia at 1.5532 found short-covering as early longs bailed to put the rate lower to start.
EURO high prints at 1.3714 in Asia found tech sellers as well; some desks report Russian demand around the 1.3680 area overnight helping to lift the rate higher. Low prints at 1.3620 in Asia found option defense ahead of the 1.3600 handle.
USD/JPY had a very quiet start to the week holding a tight range; high prints at 89.57 with lows at 89.13 making for an inside range day so far. Traders note that the rate likely has more offers from exporters above the 89.80 and 90.00 areas; a lift over 90.20 would be seen as relieving the current downward pressure.
USD/CHF is also holding a tight two-way range so far this morning; high prints at 1.0775 with lows at 1.0699 finding support near the previous lows seen Friday. Traders expect stops in size under the market closer to the 1.0660 area.
USD/CAD high prints at 1.0732 with lows at 1.0654; the rate is orbiting the 1.0700 handle in quiet action so far today. Traders look for a solid dip under the 1.0640 area to find stops from late longs with upside resistance likely to hold at 1.0800 handle suggesting more consolidation.
In my view, the USD is overdone to the upside and a correction lower is due. A lot of panic and fear went through the markets last week due mostly from concerns that sovereign debt defaults could be the next crisis to hit the global recovery. Cooler heads will prevail and despite the FTQ seen into the USD I think smart money sees the dip in equities as a buying opportunity; although many argue the correction has a bit farther to go few are suggesting that the DJIA is in a bear market. Should equities remain firm the next day or two I think money will start moving back into risk and the upward pressure on the USD will abate. Look for a downward bias to the Greenback during two-way consolidation; a long-liquidation break is due.
Jason Alan Jankovsky
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