After selling-off through the Tokyo session, EURJPY rallied through the London and New York sessions to end the day up approximately 130 pips in price action which we would describe as short-covering ahead of Wednesday's FOMC decision. Despite the rally, price remains below both Friday's high and the 1-month trend-line on the daily chart – see chart below. The short-term trend remains lower for this pair, with the possibility of a test of 160 in the cards ahead of the FOMC meeting and Friday's employment numbers.

Chart courtesy of eSignal

USDJPY gave us a rally through London and New York also, but ended the day just higher by 20 pips following the sell-off and re-test of 106.00 during the Tokyo session. Market participants point to the recent rally in Yen as being more technical than fundamental, due to the unwinding of the carry trade brought about by equity losses. However, regardless of the 'what and why' of the Yen, the trend is still up, albeit looking ripe for a correction. A sell-off in Yen – the equivalent of rally in USDJPY -- would be welcome by the BOJ also, which is slow to give up its weak Yen policy.

EUR jumped higher on more bad news for the U.S. housing market as new home sales continue to drop. The short-term trend on the daily EUR chart is now arguably higher, from its previous sideways stance, and pointing at a move on 150, which is the high of this bull market to-date. EUR is currently trading just below 148.00. Sentiment that the ECB will likely cut is dissipating, and even if it does, the consensus is that it will likely be less than European exporters are hoping for.

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