We should have another reasonably quite session in Asia although the return of Tokyo markets should ensure a bit more activity than yesterday. China is closed for the week and HK returns on Thursday.
The main event overnight was some heavy inflows into the EUR crosses, particularly in early European trade. EUR/JPY and EUR/GBP were the main movers, driven by asset managers still switching their portfolios.
EUR/JPY will again be the lead pair in Asia and the market has broken above last Friday’s highs at 125.50 in late NY trade and is currently testing further resistance near 126.00 (see chart). I still think that the upcoming G20 will continue to have an impact on the Yen so I do not expect the Yen crosses to accelerate higher, although it is a bit strange to see professional players like asset managers chasing this cross at lofty levels prior to a G20 meeting.
USD/JPY has also accelerated in late NY trade and the important level to watch is recent highs at 94.10 (see chart), above which are certain to be more stops. As with EUR/JPY, I’d be careful of chasing the trend higher ahead of the G20 but I would also be very careful if trying to pick tops.
EUR/USD is stuck in a short-term range between 1.3350 and 1.3430 (see chart) and will need to break out of this range in order to get its next bias. With USD sentiment on the improve, we may see the EUR/USD trade sideways in a 200 pip range whilst the EUR crosses move higher again.
AUD sentiment remains quite weak and its losing ground again against the EUR and the NZD but barrier protection at 1.0250 and AUD/JPY buying are providing support.
The GBP was bashed as EUR/GBP buyers returned in size and the main danger overall for the GBP is definitely still to the downside. If the USD really does catch a bid tone, then cable could well be one of the main sufferers.
The CHF and CAD are pretty much sidelined with most focus elsewhere.
Good luck today.