Euro

We can expect a busy trading session in Asia today, with the Japanese Tankan report, HSBC’s Chinese manufacturing PMI and of course the looming general election. There were no major moves overnight with the market happy to idle sideways in consolidation mode; the USD remains heavy overall whilst the fiscal cliff negotiations are ongoing and of course the Yen is the focus of most traders’ efforts.

EUR/JPY will again be the main focus and the recent uptrend is now consolidating between 108.60/109.50 (see chart). Improving conditions in the EZ debt markets are not being mentioned much but they are helping the EUR with increased real money inflows, and of course everyone now wants to sell the Yen for one reason or another. Volatility should remain very high and I do not expect to see many trailing stops emerge unless we break back below 108.00. Yesterday we saw some Samurai launches which increased demand for the Yen crosses so watch out for reports around the time of the Tokyo fix.
d

USD/JPY is also consolidating its bullish break above 82.80 and the next technical target there is a daily high at 84.15 (see chart). I’d play this range in the short-term but as it’s the Friday before the election and the market is already short of Yen, I think the topside should find plenty of resistance.
d

EUR/USD looks quite bullish overall (see chart) and talk of plentiful stops on the 1.31 handle will keep the bulls interested. Timing is everything in the FX market and we could still easily get some pullbacks depending of course on what happens in EUR/JPY. I’ll be looking to lighten existing long positions if the market stalls again near 1.3120. Expect initial support on the day at 1.3040/50.
d

AUD/USD has eased back towards its break-up level at 1.0510/15 and this will give the bulls a reasonable entry level. But I’d expect there to be stops now placed directly below 1.0500 and if liquidity is poor, these stops could easily get triggered. The hourly chart has pretty strong support also near 1.0510 (see chart) increasing the relevance of this level.
d

Good luck today and TGIF.