FXstreet.com (Barcelona) - The Euro has been in January the weakest performer of the G-10 currencies, in the first month of the year, the unified currency has dropped continuously from 1.4056 to 1.2763, which, according to Kathy Lien, Director of Currency Research at GFT, has to do with investors swifting the direction of their trades by the year-end: we talked about how the EUR/USD has a natural bias to sell-off in the first month of the year as investors reverse their year-end flows. Since 1997, the EUR/USD has sold off in the month of January 72.7 percent of the time.

This year, however, the sell-off was particularly steep, as, in Lien's opinion some other aspects came to add support on the USD side: EUR/USD has now sold off 75 percent of the time in January. The combination of falling interest rates in the Eurozone, recession and a flight to safety into US dollars has led to the strongest January sell-off in the EUR/USD in more than a decade.

For the month ahead, Lien observes the tendency of the USD/JPY to reduce its trading range: Taking a look at more than 30 years worth of data, we have found that on average the trading range in USD/JPY tends to compress in the second month of the year. In fact, of all 12 months, the average trading range in USD/JPY is lowest in February. Lower volatility could mean stability for USD/JPY because high volatility hurts Yen crosses.