Overall, the European based pairs remained range bound in the overnight session, not managing to pull any important trades. However, the yen, the cad and the aussie moved quite a bit during the London open, despite that the commodity markets (S&P futures, crude oil and gold) did not have a comparable reaction.

The Euro (Eur/Usd) is trading below the neutral pivot point (1.2955), even though earlier, it tested the 1.3000 area and the high of the previous session. The daily chart shows the 1.3000 area also acted as a strong resistance in the past, holding the euro for almost two months, at one point. Tomorrow, the ECB is expected to hold the interest rate at the current 2.00%, but resume cutting soon after.

Retail sales in the Euro-area remained steady in December, falling 0.1%, revised from 0.6%, from the previous month. From one year ago, retail sales are down 1.6% from 2.6% in November. The service side of the economy in the Euro-area has been in contraction for the last eight months according to the latest PMI release. The released number of 42.2 is near a multi-year low as the economy is struggling to show any signs of growth amid the global slowdown

The Pound (Gbp/Usd) moved 140 pips between the neutral pivot point (1.4355) and the high of the previous day of trading. The pair is trading just below the 20-day moving average, which has acted as resistance for almost 3 weeks. Tomorrow, the market expects the BoE to reduce the monetary policy stance by 50 basis points.

The U.K. Service PMI came in at 42.5, better than market expectations. The release shows the service side of the economy has contracted for more than nine consecutive months, near the fastest pace seen in the last decade. The consumer confidence for the U.K. fell in January to 40 despite analysts forecasts for a 45 reading. This is the lowest reading since the survey began in May of 2004. There are serious concerns over the economy after further reports of job losses, and this is clearly affecting the views consumers have on the present and future economic situation.

The Aussie (Aud/Usd) fell nearly 150 pips just before the London open. The pair was testing the high of the previous day of trading, when the market saw some very strong sell orders. However, it seems that only the aussie and the yen were affected at that time.

The Australian AIG services sector activity has declined for a tenth consecutive month in the services sector for January, stated the Australian Industries Group's report. The index rose marginally, by 1.7 points to 40.0. The building approvals from Australia fell a seasonally adjusted 2.9 percent, month over month, in December. This was against expectations for a relatively an increase of 2.3 percent. The trend estimate for total dwellings approved has fallen 4.9 percent for the 13th consecutive month in December. Retail sales in Australia have increased by 3.8 percent in December which is sharply higher than analysts forecasts of a 0.3 percent increase and follows a 0.4 percent increase seen during November

The Cad (Usd/Cad) bounced from the support area formed by the 20 and the 50-day moving averages in the European session. The pair was very volatile, jumping more than 100 pips, to the neutral pivot point (1.2375). This week, the cad has traded mixed, unable to trend decisively in one direction.

The Swissy (Usd/Chf) traded in a 60-pip channel overnight. The swissy moved in the same channel yesterday, during the U.S. session, unable to break significantly. Currently, the pair is trading just above the 20, the 50 and the 100-daily moving averages, which create a very strong support area.

The Yen (Usd/Yen) plunged 80 pips during the London open. The pair fell rapidly and managed to find a bottom only near the 88.80 area, which has held the pair for the last few days. The yen continues to trade in a defined range.

Asian and European Markets Continue To Strengthen

Current Futures: Dow +14.00, S&P +2.00, NASDAQ +1.00

European Trade: Equity markets in Asia and Europe rose because of the newly announced government actions. Over the same period, the U.S. futures traded mixed ahead of the ADP release.

During the overnight session, a report released by Standard & Poor's showed the rating agency cut California's debt rating to the lowest level among the U.S. states. This comes as the local authorities failed to agree on a way to close the huge deficit the state faced, forecast to reach $42 billion by 2010. California has the biggest gross domestic product among the U.S. states and eighth biggest in the world. Standard & Poors reduced the debt rating to A, the fifth lowest from the 10 investment grades.

In the Asian session, Panasonic announced it would shed 15.000 workers, or 5% of its global work force, shortly after its biggest rival, Sony, announced a similar decision. Panasonic said it expects to have a $4 billion net loss in 2008, compared with a $300 million profit forecast a few months back. It is very likely that the huge wave of job-losses will continue well beyond the second or the third quarter.

The German Dax rose 12.63 points (0.29%) to 4,387.59, while the Ftse gained 13.63 points (0.33%) to 4,178.09

Crude oil is testing the $40 support area. Crude oil for March delivery fell $0.40 to $40.40.

Gold moved very little in the Asian session. Bullion for immediate delivery fell $1.10 to $897.80.

Previous Asian trade: Tonight, the Nikkei gained 213.43 points (2.73%) to 8,038.94. The Australian S&P/Asx fell 70.80 points (2.02%) to 3,437.90