Euro

It has been a fairly quiet start so far to the FX market trading week and the prime factor at play over the next 24 hours is likely to be positional adjustment ahead of tomorrow’s BOJ statement and interest rate decision. The EUR encountered some aggressive profit taking on Friday, particularly against the CHF, the USD is starting to look attractive again across the board, and the GBP seems to be following the JPY and the CHF as the market’s next punching bag. The BOJ and the new Japanese government seem to be moving closing together when it comes to the time-frame for reaching the elusive 2% inflation target. This may keep Yen bears from getting overly nervous over the next 30 hours.

EUR/JPY volatility is sure to remain high and I think we could easily get 200 pip moves in either direction. Any dips towards the trend channel base near 118.00 (see chart) are likely to attract plenty of buyers but with the market already quite short of Yen(and maybe getting a bit unsure of the EUR), any decent rallies will bring the profit takers flocking. I’d play a 118/122 range and be ready for plenty of swing trading.
s

USD/JPY has steadied near 90.00 and most of the interest has been in the cross pairs in recent times. The up-trend does seem to be slowing down here so I suspect that we may be a bit overbought near current levels (see chart). I’m looking to play an 88.50/90.50 type range but certainly do prefer buying the big-dip play.
o

EUR/USD is on the sidelines, being driven by cross plays in EUR/JPY, EUR/CHF, and EUR/GBP. I’m pretty confident that we are still in medium term range trading mode inside a broad 1.30/1.36 range so plenty of patience is required for the pure EUR/USD trader.

EUR/CHF got hit with a sharp bout of profit taking, falling from 1.2565 to 1.2385. This was a 38.2% retracement (see chart) so it will attract buyers now as well as trailing stops below. I’d look for a few sessions of consolidation inside of this range.
p

Cable got hit hard on Friday, with the double-whammy of continued EUR/GBP strength as well as a stronger USD. This pair has been range trading for so long now that I’m wary of getting overly bearish near range lows, but caution is certainly warranted when GBP sentiment starts to turn sour. As the old adage goes, “it’s never too late to sell sterling!”

The AUD is sidelined and still playing a 1.0450/1.0600 range, with most interest elsewhere.

Good luck today.