Previous session overview

The EURUSD continued its correction lower this morning. Taking over from NY traders at 1.3160, the pair initially tried resistance at 1.3175 before turning and falling rapidly to the days low of 1.3118 by the time Europe woke up.

Cable very much mirrored the movement in the Euro, testing the NY afternoon range of 1.5872 to 1.5906 before continuing its downward correction during the Tokyo session to fall as low as 1.5820 from where early European trading interess were seen on the bid.

The Australian Dollar had a relatively calm session this morning. In the absence of economic data release, the pair held on to a tight range between 0.9135 and 0.9175. We notice that the pair has not followed any of the GBP or Euro dip and is holding  at the highest levels of the past 3 months.

USDJPY was sold off again in Asia this morning. The pair had seen a strong rally to 86.40 in NY last night , but the rally was stopped short when traders in Tokyo joined the market placing offers above 86.40. Still the Dollar has so far held support at 86.00 and is for the moment safely above the 84.78 all-time-low.

Market expectation

The EURUSD has developed a minor bearish corrective trend over the past 24 hours. Resistance currently lies at 1.3155 and while this holds the outlook is for further Euro correction down towards 1.3050 and we may eventually see a test of the key support at 1.300. A break underneath mayshould open the way for additional correction down to the 2-month trend-line with support at 1.2750. We are waiting for the ECB rate announcement, no change is expected by analysts, watch out for any hawkish statements by Mr. Trichet at the press conference following the rate announcement, any such comment may quickly put the Euro on a rising path once again.

While the Euro seems to have room to trade lower, GBPUSD seems to have completed its initial correction over the past 24H and is currently on the rebound. Strong resistance at 1.5885 is the first major hurdle, failing to clear that, keeps the pair in a neutral range of 1.5800 / 1.5880. A break on top has potential for a re-test of 1.60, a break lower should see a fall down to the underlying trend-line at 1.5680. The BOE will announce its rate decission today at 11 GMT, a change in the current policy is not expected.

The immediate danger of testing and widening the all-time-low of USDJPY has been put off yesterday and it would probably need a continuation of the overall USD weakness to see such a movement today. Currently the pair is locked in a tight 86.00 / 86.40 range and there is 100 pips of room to move to either side without harming the bearish trendline with resistance at 87.30 on top or risking a dip to new lows eventually targeting the 80.00 level and lower. A look at the EURJPY cross reveals strong support only at 111.75 - nearly 200 pips underneath of the current 113.50 level. To the upside there is plenty of room, in fact a daily close above 115.00 may have the power to push the pair up towards 120 in the medium term

The main economic events today are the rate announcements by the ECB and the MPC in England. The US will release its weekly initial jobless claims which are expected to remain stable at 455k.

Disclaimer: the data made available by Dukascopy Bank SA is for informational purposes only. Publication of this data by Dukascopy Bank SA does not constitute provision of investment advice and Dukascopy Bank SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.

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