The EUR has unsurprisingly fallen across the board after Moody’s downgraded French government bonds and their long-term economic growth outlook. This decision is likely to impact on the EUR for the rest of the morning although, with no major build-up of EUR longs in the market, its unlikely to have any lasting effect. There was some short-covering overnight in the EUR so we could see potentially see some of these positions reinstated if a bearish bias takes hold again.
EUR/JPY will hold the key from here on to moves during Asian trade, and the closer we edge towards technical resistance at 104.80, the more magnetic it will become. EUR/USD should start finding intraday support near 1.2760/70 and its unlikely that the overnight highs at 1.2820 will now be overtaken, unless something unexpected happens in EUR/JPY.