Previous session overview

On Monday, concerns over a sharp slowdown in Japanese growth, disappointment over the G7 finance ministers meeting and continued concern about major banks helped to boost risk aversion and leave the dollar well supported.

The final passage of the USD787 billion stimulus package through the U.S. Senate, and expectations that it will be signed off by President Barack Obama failed to inject any enthusiasm into financial markets.

The Euro opened the week under pressure as US futures pointed to downside and Newspapers over the weekend focused on the weakened debt structure of Eastern Europe. Japanese GDP data also added to EURJPY selling pressure.

Sterling was a major loser, falling by more than 2 cents at one stage, as U.K. banks once again became a focus of investor concern.

The Japanese Yen strengthened as risk aversion kept the safe haven well supported. Q4 GDP fell -3.3% slowing to its slowest pace since 1974.

Another wave of risk aversion, this time stemming from debt default concerns in Eastern European economies, drove repatriation flows in Asia Tuesday, sending the Australian dollar sharply lower while bond futures rallied hard.


Market expectation

Markets Tuesday are seeing large falls in the euro, U.K. pound and Australian dollar amid the risk-averse mood.

EURUSD breaks under USD1.2620 and seen easing toward next reported support at USD1.2600. Below here and rate can extend move toward USD1.2585/80 ahead of USD1.2550.

Pound extends easing through support at USD1.4150/40, the rate making a show under reported stop area between USd1.4135/30, touching a low at USD1.4128. Rate currently trades around USD1.4140. Support seen placed at USD1.4120, more toward USD1.4100. Resistance - USD1.4180.

USDJPY pullback from overnight highs extended down to the JPY92.30 area into European dealing, though as yet momentum is lacking to take on reported demand in the JPY92.10/00 area. Light stops noted under here, with additional demand at JPY91.60/50. Offers come in on approach to JPY93.00 barrier interest, said to roll off this Thursday.