US Open - More broad based USD gains overnight with an acceleration in the flight to safety trade on rising concerns over the stability of the overseas markets highlighted by the disastrous performance in the UK markets. The surprisingly firmer than expected UK inflation data (+3.1% versus +2.7% consensus) did little to prop the heavy setbacks overnight with Cable dropping to a fresh +7 year low. The primary driver of the sterling liquidation came on the back of concerns over the elevated levels of UK government debt and an escalation in fears of a potential downgrade to UK sovereign debt. It has already been a disheartening start to the week for Sterling bulls with the single currency suffering on Monday following the RBS announcement that it was set to post its biggest loss in corporate history at GBP28B. EUR/USD setbacks were also significant overnight with the release of the mixed ZEW data failing to materially factor into price action. Traders seemed to be more heavily focused on the broader global macro themes while also expressing deep concern over more talk of troubles with the Euro currency and the detrimental impact on various economies, the latest being Spain. A recent article in a local newspaper has said that the Euro is a torture instrument for Spain. Looking ahead, key event risk in the North American session comes in the form of the Bank of Canada rate decision at 14:00GMT. The BoC is expected to cut rates by 50bps to 1.00%.

Technicals - EUR/USD has broken down below the latest consolidation lows to now expose deeper setbacks towards the critical trend lows at 1.2335 from late October. Next support comes in at the 1.2850 area which coincides with the 78.6% fib retracement off of the 1.2335-1.4720 move along with falling internal trend-line support off of the 1.6040 life-time highs. Look for today's high by 1.3105 to now find fresh offers. USD/JPY price action has been relatively quiet with the pair tracking lower on the day to just exceed Monday's low at 90.15 before bouncing. Key levels to watch above and below come in at 91.30 and 90.00 respectively. Look for a break on either side for clear directional bias. GBP/USD has collapsed to a fresh 7.5 year low, with the market breaking the latest figure at 1.3900. All eyes now turn to a retest of the major +20 year lows at 1.3680 from June 2001. However, with the daily average true range nearly doubled, we would not expect to see setbacks extend much further today. Key topside resistance now comes in by the previous trend lows at 1.4350 and offers are expected on rallies towards the latter. Ultimately, a break back above 1.5375 would be required to shift the structure. USD/CHF continues to trade higher after breaking out from the inverse head & shoulders-like pattern on Monday. The break above 1.1290 opens the door for more significant gains over the coming days, possibly back towards the key trend highs at 1.2300. Today's gains have stalled out just ahead of key psychological barriers at 1.1500 and by the 50-Day SMA. Key levels to watch above and below now come in by 1.1600 and 1.1315 respectively.