No action from ECB or BOE; Yen rallies on short-covering

Euro

The majors have been fairly quiet overnight, with a brief sell-off in the EUR in early European trade caused by Spanish comments that no bailout would be sought this year being the only real volatile move. Both the ECB and the BOE kept rates unchanged, although the latter did signal a suspension of its QE program.

USD/JPY was the main mover overnight, triggering stops below 79.50 and again below 79.40 before pulling up just shy of reported institutional bids starting near 79.25. The market is long of USD/JPY and the justifications for this trade have been weakened by Romney’s election loss. Technical support levels are firm near 79.30 and again near 78.85/90, where the 100-day MA could be pivotal to the pair’s fortunes (see chart).

S

EUR/JPY looks to be posting a short-term top near 102.15 and has scope for a deeper move lower towards 99.70. Much will as always depend on where the stop-loss orders are.

EUR/USD triggered large stops below 1.2730 on the Spanish comments re bailout but has remained quiet since, with most flow interest coming from the crosses. From a technical perspective it could fall as far as 1.2605/30 before encountering any meaningful support (see chart). Topside stops are reported above 1.2780 and they could also be targeted in usual Friday trading conditions.

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AUD/USD opens at the same level as yesterday and trailing stops below 1.0380 are beginning to look more vulnerable. EUR/AUD support at 1.2220 was breached but the market bounced immediately, although it still looks bearish in short term. AUD/JPY has retraced to its recent pivot near 82.55 and we can expect an early arm-wrestle at this level.

The GBP made modest ground after the MPC suspended its QE program and the NZD continues to struggle after yesterday’s poor jobs data, losing over 3% against the Yen in the last 24 hours.

Good luck today and TGIF.
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