Forex News and Events:
The USD continues to make headway, as the optimism around the US grows and concerns of the Greek agreement erodes confidence in the EUR. However, lack of substantive drivers makes us expect a slight pullback in USD strength near term. Yesterday's release of the FOMC meeting minutes showed that the Fed is generally more secure with the pace of the US economic recovery but fairly surprised by the easing of inflation. An interesting shift in language was the clarification of the wording extended period stating a number of members noted that the Committee's expectation for policy was explicitly contingent on the evolution of the economy rather than on the passage of any fixed amount of calendar time. So for USD traders this means US economic data is critical to the timing of tightening and continued USD appreciation. But currently the FOMC is in no hurry to change policy, stating No decisions about the Committee's exit strategy were made..... In Japan, the BoJ voted unanimously to hold the policy rate at 0.1% (universally expected) and no modifications to emergency facilities were made (JGB purchases stand at JPY1.8trn per month). Interestingly, the accompanying statement was slightly more optimistic (supported by last week's Tankan survey) than the market had expected, stating improvements in the corporate sector originating from exports are expected to spill over to the household sector, helping growth gradually recover. With the JPY getting less of a kick from risk aversion trading and highly susceptible to growing yield differentials, we believe continued deprecation of JPY is likely. However, with positioning getting heavily short JPY, some level of unwind might be necessary before moving lower. With an ultra light economic Calendar, markets will be focused on a slew of speakers and Greece. Yesterday, media reports / offical comments seemed to question the sustainability and effectiveness of the EU/IMF - Greek agreement. As in all things, while the headline sounds good however the devil is in the details. Currently there is considerable disagreement between EU and German officials on what market rate will be charged if Greece was actually to use the proposed facility (of course the official line is they won't). The dispute caused a massive sell off in Greek debt with the 10yr hitting 7.16% and EURUSD to head down to 1.3355. With the IMF heading to Greece today we should expect very pro-Greek statements but when the smoke clears there will be more questions than answers.


Today's Key Issues (time in GMT):
00:00  IMF staff to visit Greece to provide budget advice.
00:00 GBP BoE MPC begins two-day meeting.
07:15 CHF Feb retail sales; last +4.4% y/y.
07:43 EUR ITA Mar service PMI index, 51.5 eyed; last 50.8.
07:48 EUR FRA Mar service PMI index, 53.0 eyed; last 54.6.
07:53 EUR GER Mar service PMI index, 54.7 eyed; last 51.9.
07:58 EUR Mar service PMI index, 53.7 eyed; last 51.8.
07:58 EUR Mar composite PMI index, 55.5 eyed; last 53.7.
08:28 GBP Mar services PMI index, 58.0 eyed; last 58.4.
09:00 EUR Q4 GDP - revised, +0.1% q/q, -2.1% y/y eyed; prelim +0.1%, -2.1%.
09:00 EUR Q4 PPI, +0.1% m/m, -0.4% y/y eyed; last +0.7%, -1.0%.
10:00 EUR Ger Feb industrial orders, -1.0% m/m eyed; last +4.3%.
13:00 USD Ex-Fed Greenspan testimony before Financial Crisis Inquiry Commission
18:00 USD Kansas City Fed President Hoenig (FOMC voter)
17:30 USD FOM Chair Bernanke speech in Dallas
19:00 USD Feb consumer credit; last $5.0 bln
23:50 JPY Core machinery order,s % m/m
23:50 JPY Current account, ¥ trn

The Risk Today:
EurUsd It's slow going in the currency markets with sparse economic data to shrug off the residual long-weekend sluggishness; however we do have something to smile about as the head and shoulders pattern we highlighted yesterday is playing out according to plan; with the break of the 1.3460 neckline triggering a continued sell-off to 1.3356 lows yesterday evening. Our target for the original chart pattern remains at 1.3330, but we do note that asecond stab at those lows only got as far as 1.3357 this morning, so we are now slightly cautious about the potential for a rebound. For the time being then, we keep hold of our short but move our stop down to 1.3420 to guarantee some profits; the logic being that if any rallies manage to climb that far above the 1.3410 overnight rebound high then it could confirm a very-short-term double bottom pattern which we would rather not ride all the way back up. We still assert that should the bearish momentum resume, there is ample chance we could overshoot to the downside target with the next recognized support level below not coming in until 1.3268 (26 March lows). Rallies from here will meet first resistance at 1.3460 (neckline of our head and shoulders), whilst the upper edge of the downtrend channel comes in today at 1.3530.

GbpUsd After the break of the steep 1-week uptrend late last week, GBPUSD has been pretty directionless, and we feel that the pair is likely to begin a period of consolidation from here as the markets readjust positions ahead of a continued move higher. Our bullish bias is influenced by the breach of the long term downtrend back on the 29 March (which in our minds is a sure sign that a major correction higher is on the way), but as highlighted by yesterday's hanging man candlestick on the daily chart, the bullish momentum is waning for the time being. Look for a choppy range to ensue; as we really need some additional positive data or more clarity on the outcome of the election with regards to fiscal consolidation and the UK's sovereign credit rating before the bullish momentum can continue. The defining levels we now watch on the downside are the 1.5115-30 first cushion of support followed by 1.5040 (31 March lows) just below there; whilst the pivot level at 1.5350 (with the 50-day moving average at 1.5346), and 1.5383 highs from the 17 Mar are the resistance levels of note on the topside.

UsdJpy There was not a great deal of new information to extract from the latest Japanese rate decision, with the unchanged policy and minimal adjustment to the statement continuing the tradition of extremely dull BoJ meetings. USDJPY does seem to be slightly heavier in the first half of this week, with the grind lower yesterday briefly dipping below the 93.77 level to touch lows of 93.57 overnight. However, as discussed yesterday, we prefer to wait for either a deeper correction towards 92.50 or a confirmed break above 95.00 before we consider re-charging core longs. The reason being that as things stand, the 95.00 resistance overhead makes the potential risk-reward ratio less attractive for long entry, so we need to get either cheaper levels to buy in, or in contrast, some breakthrough above there to open up fresh targets above. Indeed, even if we do end up waiting for that latter scenario, there are clear skies above 95.00 until the lofty 7 August 2009 highs at 97.78. Next major support below comes in at 92.10-15 coinciding with the back side of the former downtrend and 30 March lows, then the 200-day moving average at 91.40.

UsdChf Another very choppy pair in neutral consolidation mode at the moment; USDCHF's break of its long-term downtrend on 4 February has been far from scintillating in the weeks since, and we instead see current price action as a wide range between 1.0430 -1.0750 rather than any new trend. We note that today, the 1.0750 resistance also coincides with an old downtrend vibration channel so we take this morning's quick USD bounce up to 1.0720 to sell into, looking for a dip back toward the 1.0600 mid-range levels in the coming days. Either side of our current range there are ample technical levels likely to make a breakout sticky; on the topside 1.0800 represents the first hurdle, with the formidable 1.0900 level beyond. On the downside, expect support to step in around 1.0473-76 (200-and 100-day moving averages), before a major area of bids around 1.0385 where the back of the former downtrend lies.

Resistance and Support:

S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot