Most of yesterday’s action was in Asia after the S&P downgrade of Spain was followed by Australian jobs data. Central banks from Brazil to Korea cut rates and today it’s Singapore’s turn, with the MAS expected to ease policy by lowering the slope of its policy band. Comments overnight out of the G7 meeting saw USD/JPY rise off recent lows and further comments are likely throughout today.

EUR/USD has once again bounced off the 200-day MA near 1.2825 and the subsequent bounce is yet more evidence that we are in range trading mode. Most of the selling after yesterday’s S&P downgrade of Spain came from leveraged players but when support levels held, they were forced to cover. The market is now speculating that the downgrade to just above junk may be the catalyst for Spain to seek bail-out funds, but with regional elections due in just over a week, political considerations may mean that the request will not happen just yet.

The AUD/USD bounced immediately after a worse-than-expected unemployment rate was announced, a sure sign that the market was short heading into the event. Nevertheless banks report that offers remain very heavy in the vicinity of 1.0300 and they capped for the remainder of the day. Risk factors for today will be the G7 in Japan and the MAS decision, but AUD/USD should stay inside a broad 1.0220/1.0320 range.

EUR/AUD bulls will be heartened by the fact that it’s fall was arrested near a 61.8% retracement level at 1.2515 (see chart).

USD/JPY should remain reasonably well supported intraday with the prospect of further supportive comments from G7 officialdom. Comments from Geithner and Yellen could be interpreted as giving Japan the green light to intervene (on its own of course). Offers are still reportedly solid above 78.80 but risk-reward today would seem to definitely favour the USD/JPY bulls.

EUR/JPY continues to offer up plenty of trading opportunities inside of a broad 100/102 trading range (see chart).

Cable has again stalled ahead of Sovereign bids below 1.6000 although gains have also been hard fought with real-money funds selling into strength.

Good luck today and TGIF.