Previous session overview

The euro fell against the dollar and the yen in Asia on Monday as European authorities at the weekend meeting of financial heads from the Group of Seven failed to offer realistic plans to help Greece out of its debt woes.

European Central Bank President Jean-Claude Trichet said Saturday in Iqaluit, Canada, where the G-7 meeting was held, the ECB expects "the Greek government will take all necessary decisions" to cut its debt burden, while the ECB "will continue to monitor closely" these steps.

Last week, Greece told the European Commission it would decrease its debt to 3% of gross domestic product from 13% currently. But market participants don't believe the plan is realistic, continuing to exert downward pressure on the European common currency, dealers said.

The euro sank Friday as sovereign debt weighed heavily on markets, with investors focused on fiscal issues in deficit-laden Greece spreading to Portugal and other euro-zone economies.

The Pound tumbled against the US dollar on the US jobs data and Euro zone sovereign debt problems. UK's own debt problems and uncertainty ahead of an election in June continued to pressure the sterling lower. The Bank of England left rates unchanged yesterday and suspended its "quantitative easing" program.

The Australian dollar ended little changed in Asia and government bonds ended mixed as regional markets bided their time looking for fresh leads from U.S. and European markets later today.
 

Market expectation

The pound, euro and dollar are a bit lower against the yen on Monday as some investors outside Japan sought some risk protection on residual worry about the euro zone and prospects for weaker stock markets.

Traders said in the absence of surprises from the weekend meeting of the Group of Seven nations in Canada, the focus will remain on fiscal issues bedeviling some of the European nations.

For EURUSD traders says that he has seen no sign of the major Asian sovereign buying but suggests they may emerge below the figure, noting option barrier levels at USD1.3575, USD1.3550 and larger at USD1.3500. Rate currently trades around USD1.3635. Light data calendar for the day so attention on any euro zone developments. Bids remain USD1.3620/00, more toward USD1.3580. Offers seen placed at USD1.3645/50, more toward USD1.3660.

For Pound support now seen placed at USD1.5550, with further interest said to remain around USD1.5535/30 ahead of stronger interest between USD1.5515/00 and ahead of USD1.5450. Resistance now seen placed at USD1.5585 ahead of USD1.5600 and stronger interest at USD1.5620/2.

While further gains in the yen are expected, investors should be cautious about the Japanese authorities acting to keep the dollar from falling below JPY87, said analysts.

European stocks are expected to open higher Monday, taking their cue from a late rally on Wall Street Friday.

EUR/USD
Trading range: 1.3610 - 1.3710
Trend: Upward
Buy at 1.3623 SL 1.3591 TP 1.3700

USD/JPY
Trading range: 89.10 - 90.10
Trend: Upward
Buy at 89.24 SL 88.92 TP 89.96

GBP/USD
Trading range: 1.5525 - 1.5635
Trend: Upward
Buy at 1.5537 SL 1.5505 TP 1.5625

USD/CHF
Trading range: 1.0780 - 1.0675
Trend: Downward
Sell at 1.0766 SL 1.0798 TP 1.0682

Although the G7 has come and gone with no official statement on currencies, the USD is barely moved to only slightly lower against all major currencies on the day, with price action classified more as consolidative.

Although the G7 has come and gone with no official statement on currencies, the USD is barely moved to only slightly lower against all major currencies on the day, with price action classified more as consolidative. In Japan, the current account surplus widened for a fifth consecutive month, while loan growth shrank for the second consecutive time since December 2005. Meanwhile, BOJ Yamaguchi was on the wires warning that the local economy would be in a severe condition until Summer or mid-2010.

Elsewhere, Treasury Secretary Geithner was out propping the buck over the weekend after saying that the US would never lose its triple-A status. Geopolitics remains on investor minds after Iranian President Ahmadinejad ordered the start of a higher uranium enrichment for use at a medical research reactor. The commodity currencies have found some bids in the early week on news of the completion of an Australian coal supply deal to China, and well bid gold and oil prices. In the UK, Sterling has been relatively underperforming as new concerns arise over the rising debt in the country, which some have compared to those distressed Eurozone economies. On the data front in Europe, the only key releases were Swiss unemployment which came in a tad stronger than expected, and Eurozone Sentix, which was much weaker.

It will be interesting to see how things play out for the remainder of the day, with the economic calendar in North America not really seen factoring in to price action. The USD is now highly overbought against most major currencies and we would not at all be surprised to see the development of some form of a correction over the coming days. Looking ahead, the only released schedules in North America comes out of Canada in the form of housing starts (180k expected) due at 13:15GMT. US equity futures point to a higher open, while commodities are also very well bid.

TECHS

EUR/USD The 1.3800 objective from the 1.4200-1.4600 consolidation break has now been well exceeded, with the market dropping sharply into the 1.3500’s ahead of the latest minor bounce. While our core view continues to favor additional downside, short-term technical studies are now severely oversold and warrant a much needed and healthy corrective bounce. A break back above 1.3745 would be required to officially trigger a short-term correction, while inability to do so will keep the focus on next downside target by psychological barriers at 1.3500.

USD/JPY Last Thursday’s violent pullback certainly dents our shift in outlook in which we had been projecting significant upside over the medium-term. However, the market has still not managed to close below 89.00 and it will be interesting to see how things play out from here. In some ways, the recent whipsaw price action makes it a little easier to call. A break back below 88.55 will confirm bearish resumption, while above 91.30 should accelerate gains to the topside and put the constructive outlook back in play. Until then we remain sidelined.

GBP/USD The market has finally taken out the key October lows just over 1.5700 to likely open the door for some medium-term setbacks over the coming weeks. However, daily studies are now looking quite stretched and there is the strong risk for a material corrective bounce before any additional weakness can take place. As such, look for a push back towards the 1.6000 area from where a lower top will carve out ahead of eventual bearish resumption and fresh declines towards critical psychological barriers at 1.5000. A break above 1.5775 is required to take pressure off of downside, while next key short-term support comes in at 1.5500.

USD/CHF The latest break back above 1.0500 suggests that the market has now carved out a major base that exposes some fresh medium-term upside towards 1.1000 over the coming days. However, given the intensity of the run-up over the past few days from 1.0200 through 1.0700, a short-term corrective pullback can not be ruled out. Nevertheless, we would look to use any dips into the 1.0400-1.0500 region as a formidable opportunity to build on existing longs in anticipation of a fresh higher low.

Previous session overview
The Swiss franc fell to multi-month lows against the euro and dollar in Asia Friday as market participants said Switzerland's central bank made a rare and aggressive intervention to curb its currency.

The euro spiked around 0300 GMT to CHF1.4905, its highest since Dec. 28, from CHF1.4635. The dollar jumped to CHF1.0800, its highest since Aug. 18, from CHF1.0670.

Two dealers said they saw franc-selling orders under the name of the Swiss National Bank. The central bank was bidding for euros at CHF1.49, far above the spot rate of CHF1.46, they said.

The dollar and euro were stronger against the yen as investor's squared yen-long positions after steep gains overnight by the Japanese currency when investors fled risky assets amid stock falls and sovereign-credit worries. At 0530 GMT, the dollar was at JPY89.65, down from JPY88.94 Thursday in late New York, and the euro was at JPY122.90 from JPY122.20.

Euro plunged to a more than eight-month low against the dollar and a nearly 1-year low against the yen as worries that Portugal as well as Spain would face financial problems as Greece continued to pressure the single currency lower on Thursday.

Pound gained slightly after the Bank of England (BOE) left rates unchanged and suspended its "quantitative easing" program. However, BOE said that they may make asset purchases if needed. The comments suggested recovery in the UK will be at a slow pace.

The Australian dollar slid in Asia trade Friday as markets weren't able to overcome a wave of global risk aversion that pushed on the currency overnight. That same fear of risk drove Australian bonds higher.

Market expectation
EURUSD drops back below USD1.3700 as the euro comes under fresh assault. Rate falls from recovery highs around USD1.3725 to USD1.3685/80 area. Support seen placed around the overnight lows at USD1.3669, with further interest seen between USD1.3660/50.

For Pound resistance seen placed toward USD1.5750 (USD1.5748 61.8% USD1.5776/04) ahead of USD1.5760 (76.4%) and USD1.5775/80. Support remains in place between USD1.5705/1.5690 with stops below, which if triggered to open a deeper move toward USD1.5660/50.

Dealers said the bias remains yen-positive as risk appetite is still low due to lingering concerns European public finances.

European stocks are expected to open lower Friday, as markets fear that debt levels in the euro-zone's 'peripheral' countries will escalate, and the worries will spread to other European economies.

Investors will be closely watching for U.S. nonfarm payrolls data for January due at 1330 GMT. If the report misses economists' forecasts as it did last month, the yen would benefit most, dealers said. Economists in a Dow Jones Newswires poll expect payrolls to be unchanged in January from December.

EUR/USD
Trading range: 1.3735 - 1.3635
Trend: Downward
Sell at 1.3725 SL 1.3757 TP 1.3648

USD/JPY
Trading range: 89.90 - 88.95
Trend: Downward
Sell at 89.76 91 90.08 TP 89.04

GBP/USD
Trading range: 1.5755 - 1.5645
Trend: Downward
Sell at 1.5745 SL 1.5777 TP 1.5657

USD/CHF
Trading range: 1.0700 - 1.0805
Trend: Upward
Buy at 1.0710 SL 1.0678 TP 1.0794