Lack of any real event risk in the European session and ahead of thelightened US holiday trade has certainly not been reflected in the price action with the Euro once again back under pressure and looking to take out key downside barriers at 1.2700.Talk of larget Double-No-Touch option expiries coming up in EUR/USD and USD/JPY. Looking to sell Euro on intraday rally.
Fundys - Lack of any real event risk in the European session and ahead of the lightened US holiday trade has certainly not been reflected in the price action with the Euro once again back under pressure and looking to take out key downside barriers at 1.2700. The only significant event risk in overnight trade came in the Asian session with the release of the disappointing Japanese GDP data which came in at -12.7% annualized after putting in the weakest quarterly performance since the first quarter of 1974 . Nevertheless, according to MoF Sugimoto , there are no plans at present to seek any additional economic stimulus measures. Failure by the G7 to cite any specific currencies has also contributed to the USD bid tone while the passage of the Obama plan leaves traders with a sell the news mentality, to once again put pressure back on global equities. Sterling has come under pressure on the back of the broader USD rally but has also found additional offers after the single currency was not mentioned at G7. The latest CBI report has also generated fresh offers after the UK's largest business lobby forecast a -3.3% GDP for 2009 and called for the worst slump since 1980 , while the Rightmove house price index was also dissapointing after falling to a record low 9.1%. Also seen helping to prop the greenback across the board has been the latest comments from China central banker Fan Gang that the USD will continue to dominate the global financial system. Finally, oil has been getting a small boost on Monday on bullish comments from the IEA that there could be a squeeze on crude supplies in 2010 when global demand picks back up.
Techs - EUR/USD (See Below) . USD/JPY gains have stalled out with the market trading relatively flat on Monday. Key levels to watch over the coming session come in by 92.45 and 91.35. Look for a break above or below the latter for clearer short-term directional bias. GBP/USD setbacks on Monday have stalled out at 1.4150, just shy of last Thursday's low 1.4135 lows. There is some decent support in the 1.4055-1.4150 area but a break below 1.4055 will officially put the pressure back on the downside. A break above 1.4350 will delay and reintroduce possibility for higher low at 1.4135. USD/CHF remains locked in choppy consolidation but the market looks to be contemplating another push to the recent trend highs at 1.1785 (10Feb high). Key levels to watch above and below over the coming session come in by 1.1715 and 1.1595.
Flows - Talk of good offers in Cable between 1.4275-1.4350; Russian names on the offer. Talk of two large EUR/USD DNT options set to expire this week at 1.2700-1.3500 and 1.2680-1.3680. Talk of a large 87.00-93.00 DNT structure in USD/JPY set to expire on Thursday.
Trade of the Day - EUR/USD : Inability for the pair to close above 1.2940 last week seriously dampens any hopes for a legitimate recovery. The market has been trading with a heavy tone into the early week and a closer look at the daily chart shows the formation of a bearish descending triangle formation with the market gradually making a series of lower highs while at the same time finding support right by the 1.2700 figure. This would imply that we are nearing a break below 1.2705 (2Feb low) for a bearish resumption to expose the key trend lows at 1.2330. Strategy: SELL@ 1.2860 FOR A 1.2550 OBJECTIVE, STOP @1.2955.