USD/JPY Eyeing 87.00

The USD/JPY continues to decline towards 87.00. Although the decline appears to be stalled at the moment, the stochastic shows that the momentum is strong, and along with price action, which broke a rising support, shows that further decline is likely.

Sterling drops

Sterling drops to the day's low pretty much across the board as BOE governor King kicks off his testimony to the TSC on a downbeat tone. King said risk to a gradual recovery are on the downside, recovery in the UK's largest export markets have stalled. GBP/USD drops to 1.5485 from around 1.5525, EUR/GBP hits the day's high of 0.8816.

Dollar Falls

The USD is falling after more dovish comments from Fed's Yellen reducing even further any speculation of a US rate hike. Attention will now focus on what Bernanke has to says Wednesday. The EUR is the main gainer as an unconfirmed report that the Dubai government is bailing out Dubai World with $5 billion lifts global sentiment. However, the single currency didn't get any help from the latest Ifo survey from Germany which declined a little rather than showing an expected improvement. The USD is down at Y90.91 while the EUR is up at $1.3662. The GBP is up at $1.5523.

Dollar Higher, Euro Lower

The USD is mostly higher and the EUR is mostly lower as the market waits to see if the meeting of Europe's finance ministers produces any more details of Greek package. News that Dubai World is still battling to reschedule about $22bn of debts is only helping a general rise in risk aversion. Japanese 4Q growth of 1.1% is better than expected but deflation remains a problem. The dollar is up at Y90.06 while the EUR sinks to $1.3595. GBP is down at $1.5669.

big week for UK data

It's a big week for UK data notes Trader with Tuesday's CPI likely to trigger an exchange of letters between BOE governor King and the Chancellor. Wednesday's MPC minutes should give more insight into the surprisingly dovish Inflation Report with labor market data also on the menu. Thursday brings public sector finances for January which are likely to be key to the full year borrowing requirement since this month is a particularly important one for receipts. Friday brings retail sales which are likely to be distorted by bad weather.

GBP/USD Today

GBP/USD ticking higher as sterling garners support from the strong February Rightmove housing price data, which showed asking prices have jumped by 3.2%, the biggest monthly move in almost three years. However, BNP Paribas notes viewer traffic declined, suggesting that higher asking prices are unlikely to translate into a lasting stabilization of the housing market. For GBP/USD the bank sees support at 1.5550, but says once this gives way then risk is toward 1.5220. GBP/USD now trades at 1.5686.

Dollar Gains...

All the fundamental dials turned in the USD's favor last week. Unexpected policy moves by China, disappointment over Greece and hints of higher U.S. rates will now ensure a more extended rally for the U.S. currency than even the most bullish had expected. Risk aversion has returned with a vengeance and the dollar's safe haven status is back.

EUR/JPY Today

EUR/JPY rising as Europe investors covering shorts, may extend gains to 123.50, says trader at Tokyo bank. Resona Bank dealer Keiichi Iguchi echoes view, saying "the euro had fallen very sharply in recent days, providing a window of opportunity for investors to cover shorts now." Other JPY crosses like AUD/JPY climbing in tandem; selling of JPY also pushing USD/JPY up.

EUR/USD Today

EUR/USD's selloff reached its channel bottom at 1.3540 and some near-term consolidation should now be allowed for says Trader. However, while the spot remains capped by double Fibonacci resistance at 1.3950-60 she says an immediate downside bias will remain with a target of 1.3405. For a strategy trader favors shorts from 1.3725, adding at 1.3805 with a stop at 1.3860, taking profit between 1.3580-60. EUR/USD now at 1.3722.

EUR/USD climb above 1.3730

EUR/USD rises as short-term players in Asia covering short positions, but unlikely to climb above 1.3730 given that sell-orders from Europe investors have been placed around that level, says trader at Tokyo major bank. Adds market could become subdued ahead of EU leaders' meeting on Thursday, limiting further gains for pair. Notes some players hope EU may find solution for sovereign debt worries in some member nations, but "the outlook is very uncertain and players seem unwilling to bet on one particular trading direction."

YEN is mixed

1-month ATM USD/JPY implied volatilities down slightly at 12.60%/13.30% vs 12.65%/13.35% as rise in spot market prompts some players to sell USD downside hedges. One player sold 1-week USD-put/JPY-call contract with Y89.30 strike price, face amount of $50 million, says options trader at major Tokyo bank. Says "the dollar-yen's outlook is mixed. So even if implied volatilities fall on spot gains, the pace of decline is likely to be moderate" as players may scoop up options on dips.

EUR/USD Today

The euro's over-two-month downtrend was extended earlier to $1.3647, but it has snapped back to trade as of this writing just below weekly resistance at $1.3740, which is now the nearest stop for intraday trades. New downtrend lows would point the euro to $1.3523. Take profit at $1.3582. If trades are stopped above $1.3740 then look for a move up to $1.3847.

GBP/USD Towards 1.5710

GBP/USD has blown away support at 1.5835 and the next target is the October 2009 low of 1.5710 says Trader. Below here 1.5625 should give support and may even trigger a rebound says the bank, otherwise any drop below 1.55 implies a major shift in sterling sentiment. GBP/USD now at 1.5766.

EUR/USD could towards 1.3485

A break of 1.3800 level in EUR/USD could trigger a move lower towards 1.3485, said Michael Hewson, market analyst at CMC Markets in London. "In the long term, the euro has potential to hit 1.3480 and even lower, but not ahead of (Friday's) employment report in the US," he said. The market is "fixated" on the sovereign debt problems faced by not just Greece, but Portugal and Spain, he said. "As regards the ECB, Trichet didn't really add anything new. He simply reiterated the old mantra of the stability pact." EUR/USD was at 1.3922 from 1.3905 late Wed.

ECB-decision press conference

In the post-ECB-decision press conference, Trichet stressed that the consolidated budget deficit of the euro zone, at 6% of GDP, remains well below the analogous figure elsewhere in the developed world. He cited IMF estimates that the deficits in both the US and Japan will be over 10% of GDP this year. Trichet had earlier sketched an outlook for the euro zone's economy that was identical in most respects to the one he presented a month earlier. He said growth is likely to stay moderate and uneven this year, thanks to rising unemployment, low investment and a high degree of uncertainty. The outlook for inflation, too, remains comfortable, Trichet noted.

EUR/USD ticked down

EUR/USD has ticked down to 1.3833 as ECB's Trichet reads prepared remarks on key euro zone interest rate, from 1.3849 before the press conf. Investors will be listening after Trichet's prepared remarks for any clues on how the ECB might address sovereign debt issues in Greece and other euro zone economies.

USD/JPY Trend 93

USD/JPY may rise above Wednesday's high at 91.28 later, vs 90.98 last, if U.S. weekly jobless claims for week through Jan. 30 due at 1330 GMT show improvement, "as the market's really focused on the U.S. jobs market as a signal for the timing of any Fed interest rate hike," says Shinichi Hayashi, FX dealer at Shinkin Central Bank. Ahead of  non-farm payrolls for January, expected to show no jobs lost compared to 85,000 shed in December, says "an improvement in the weekly claims, even though it's not a major indicator, would probably brighten the outlook for Friday's data." Jobless claims expected to total 460,000, down from 470,000 in previous week. Meanwhile, if payrolls do beat expectations Friday, says "dollar/yen could easily rise back above 93.00, which is where it was before the last payrolls report (released Jan. 8) brought the negative surprise that pushed it down."

EUR/USD downward pressure

While EUR may not see sharp swings vs USD,JPY for rest of week, as even after U.S. non-farm payrolls Friday, players may remain hesitant to place big bets before outcome of G7 Saturday, common currency may continue facing trouble next week, analysts say. "Once we get past the U.S. jobs report Friday and the G7 this weekend, the focus will return to the sovereign debt problems, and so I think the downward pressure will stay on the euro in the longer term," said Trader. On top of lingering concerns over Greece's fiscal problems, EUR-negative uncertainty over Portugal, Spain also mounting, dealers say.

EUR/USD Today

ECB rate call at 1245 GMT, Trichet press conference at 1330 GMT, may keep downward pressure on EUR/USD, with pair possibly targeting 1.3700 if automated stop-loss selling orders around recent low at 1.3851 tripped, says Hideaki Inoue, chief manager of forex and financial products trading at Mitsubishi UFJ Trust and Banking. ECB expected to keep policy rate at record-low 1.0%, Trichet expected to highlight rocky road to fuller euro-zone recovery. If EUR/USD does fall sharply, Inoue says that could weigh heavily on EUR/JPY, possibly dragging pair as low as 124.00 vs last 126.30. Meanwhile, says EUR likely to stay top heavy for rest of Asia session after worse-than-expected NZ unemployment data, Australia retail sales "have added to the overall negative atmosphere surrounding the euro."

EUR/USD Sell over 1.4000

The EU response to the Greek budget may help EUR/USD to blip over 1.4000. But, says Trader, start considering going short again over that threshold. "Both Greek credit default swaps and yield spreads indicate that EMU woes are far from receding," the bank says. The pair is now at 1.3977.

EUR/USD may 1.3900

The prospect of a drop in EMU services PMI in January will not help EUR/USD, says Trader. Aside from the Greek debt situation, the bank says equity markets have also encouraged the euro to slip. However, if the S&P can stay above the 1070 lows seen earlier in the week and the EU manages to cap concern over fiscal policy, EUR/USD may find support at 1.3900, the bank says. EUR/USD is at 1.3974.

AUD/USD move to 0.8000

It looks like China may have let out the last of the air out of the AUD's bubble. For most of 2009 the Australian currency forged ahead. But now, concerns over China are casting a long shadow and RBA rate hikes will come much slower than expected. Instead of staging a recovery back up to the $0.90 level the AUD may now be headed down to $0.80. AUD/USD is at 0.8883.

market today

EUR/USD marks fresh intraday high at 1.3990, rising on coattails of GBP/USD, which gains after automated buying orders from model funds triggered at 1.6010, 1.6020. Says "we could see a bit more of this kind of technically driven rise in euro-dollar, but the resistance should still be pretty heavy around 1.4000."

EUR/USD ....1.4050

EUR/USD up tad as slight rebound in Asian bourses (Nikkei closed up 0.3%) buoys demand for risk-sensitive assets; pair could rise further later, possibly to 1.4050, if European Commission tempers concerns over Greece's finances in official assessment due later of country's plans to shrink budget deficit, says Trader, senior FX dealer. "My feeling is that there's a greater chance that the commission may issue some kind of supportive statement about Greece today, and that would give the euro some (more) support." EUR/USD last 1.3968.

GBP/USD below 1.6100

GBP/USD testing, bouncing and closing above the 1.5880-30 area targeted by Trader, suggests strong demand in that area, says the bank. However, while the old-range lows near 1.6080-1.61 cap the rate and momentum lacks a bullish divergence signal, a move on the October low of 1.5710 could be seen later in the week. GBP/USD now at 1.5916.

USD/CAD Today

A key day reversal in USD/CAD Monday, accompanied by evidence of divergence, suggests there will be no breakout this week by USD/CAD from its 3-month trading range says Trader. The pair now trade at 1.0588. The bank looks for a shallow correction toward 1.0555-30 where signs of a base should appear and then be followed by another run toward the late November highs of 1.0750.

Coming G7

Currencies may be discussed during this week's meeting of the Group of Seven leading industrial nations, but exchange rates are unlikely to be at the heart of talks on the global economic outlook and the necessity to better coordinate macroeconomic policies, a French finance ministry official said Tuesday.




The official added that the G7 won't necessarily issue a final statement.



"These discussions will mostly be informal....it is possible that the G7 will feel the need to communicate on currencies, but it will only do so if it has a particular message to convey on exchange rates," the official said.



"Currencies will come up in the talks when issues of policy coordination are discussed," the official added.



Financial regulation will also be discussed, with the latest proposals by the Obama administration to curb the size of banks and their risks likely to feature high on the agenda, the official added.



The G7 meeting is taking place in Iqaluit, northern Canada, Feb. 5 and Feb. 6.

EURO no favors

The EUR will not get any more favors now, according to Forex Focus by Nicholas Hastings. As events later this week are likely to show, while hopes of a U.S. economic recovery are improving, the prospects for the euro zone will only get worse even if the European Union caves in and comes to Greece's rescue. Add to this a continued level of global risk aversion and a further decline in the foreign assets held by U.S. mutual funds and a EUR down at $1.3000 looks very likely.

AUD/USD Today

AUD/USD could come under further pressure from offshore though should find good support at 0.8500, says GFT strategist Boris Schlossberg. "The Aussie remains the highest yielding currency in the G-20 universe and will no doubt eventually find support at the 0.8500 level or below from longer term value players. For the time being however, the utter surprise of the RBA action is likely to pressure the unit with traders testing the 0.8700 figure, especially if risk aversion flows accelerate as the night progresses." Pair last 0.8791.

RBA keep rates at 3.75%

USD/JPY, EUR/JPY fall alongside AUD/JPY as AUD hit by RBA decision to keep rates at 3.75%, dealers say; move disappointed players who had expected bank to raise rates 25 bps. USD/JPY goes as low as 90.61, EUR/JPY to 125.85. Still, Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow, tips USD/JPY to be supported at 90.30 rest of day, EUR/JPY at 125.70; USD generally higher vs EUR, AUD after RBA outcome and that may help USD/JPY. Also says players waiting to see what Paul Volcker, chairman of Economic Recovery Advisory Board, has to say about newly-proposed U.S. financial regulations in testimony before Senate Banking Committee later.

EUR/USD could drop to 1.3000

EUR/USD could drop to the 1.3000-1.3500 range over the next few months, according to Steve Barrow, head of G10 strategy at Standard Bank. Concerns over Greek sovereign debt are likely to abate somewhat, but investors unwinding their longer-term positive bets on the common currency because of concerns over slow growth and fiscal issues in other euro zone countries will weigh on EUR/USD, Barrow says in a note to clients. "It looks as if euro weakness has almost developed a momentum of its own," Barrow says. EUR/USD was at 1.3923 from 1.3866 late Fri, according to EBS via CQG.