Previous session overview
On Friday, the dollar and the yen fell Friday against many rivals, including the euro and the pound, as optimism over the passage of the U.S. economic-stimulus legislation spurred investors to seek riskier assets.
On Friday, EURUSD again basically held a sideways trading pattern. Poor EMU GDP data and a disappointing US consumer confidence capped the upside in EURUSD. The upcoming G7 meeting also prevented big position taking in the major cross rates. The pair closed the session at USD1.2862, almost unchanged from the USD1.2861 close in Thursday.
The Sterling rebounded during the day briefly touching USD1.46 before settling back into the US close. Market views are mixed with some participants covering shorts ahead of the G7 on concerns the Pounds weakness may be mentioned.
On Friday, USDJPY was remarkably well bid. The pair traded in the JPY91.00 area at the start of trading in European and extended its rebound throughout the session. USDJPY closed the session at JPY91.93, compared to JPY90.94 on Thursday.
The Australian dollar was weaker in Asia Monday, weighed down by a constant grind of global risk aversion as weaker equity markets and worse-than-expected Japanese economic growth data fueled the bearish mood.
Market expectation
The euro's weakness Monday followed fourth-quarter data from the euro-zone on Friday showing the region suffered its sharpest contraction in GDP since records began in 1995.
EURUSD bids seen placed on approach to USD1.2720, with stronger interest positioned ahead of USD1.2700 (USD1.2720 and USD1.2706 recent lows). Suggestions emerging that another USD1.27/1.37 doesn't option structure could be in play expected to draw protective demand if the base is threatened. A break below the figure expected to draw demand between USD1.2690/80, if move through the barrier level is seen pressured (profit take buying to emerge), a break below here to open a deeper move toward USD1.2650 ahead of USD1.2610. Resistance seen placed at USD1.2780/85, more between USD1.2800/10. Lot of gaps on euro charts which technical traders will look to be filled.
For Cable bids placed on approach to USD1.4150 managed to contain the move, with rate currently trading back around USD1.4180. Below USD1.4150/40 and rate can sink toward USD1.4100 ahead of USD1.4080-50. Resistance seen placed at USD1.4250/65, more toward USD1.4280/85.
EURGBP made an early show back above stg0.9000 into Europe, trading up to stg0.9010 before dropping back to currently trade around stg0.8980. Resistance remains at stg0.9010, a break above to open a move on toward stg0.9025/35. Support stg0.8965/60 ahead of stg0.8930/20.
Traders peg little on the horizon to break the cycle, but expect a quiet offshore session with U.S. markets closed for President's Day holiday.
The Japanese yen outlook remains contingent upon risk trends, and keeping this in mind, traders should watch out for the forex market's reaction to both the G7 statement, Japanese GDP results, and word on final votes on the US fiscal stimulus place.
