USD adrift as sterling demands full attention

Key developments in FX:

Little action in the majors outside of sterling today due to the US public holiday. But sterling gapped lower to start the action this week on wobbly sentiment ahead of British prime minister Theresa May's major Brexit speech tomorrow. The sterling bulls are hard pressed to make their case and will have to do so tomorrow to get any traction.

Charts:

EURUSD

The EURUSD squeeze hasn't been able to take out the notable Fibonacci retracement near 1.0670 that we have pointed out previously. Two key event risks that should prompt more volatility in the coming week include the European Central Bank meeting Thursday and the start of Donald Trump's presidency on Friday.

USDJPY

USDJPY managed to pull itself together and bounce from marginal local lows seen on the sterling-inspired market volatility to kick off the week overnight. a break of the overnight lows could see the action continuing a bit lower,though we're getting into some important support in the general 112.00 area, which is near the weekly Ichimoku cloud level. Note that the daily cloud steepens notably in the days ahead and is actually above the current price by late next week. (If broken into, the opposite side of the cloud is the next level of note.)

EURGBP

The pair gapped higher on press reports fretting the risks from May's speech tomorrow on Brexit and whether she is willing to risk so-called "hard Brexit" scenarios. The level traversed overnight includes the final notable Fibo retracement (the 61.8% retracement near 0.8825). This is the last notable level, perhaps, to keep a head and shoulders formation in the making and to stave off  a double top or even bullish continuation. Tomorrow's speech is the obvious catalyst for what comes next, either way.