The London session saw relatively good price action in what is expected to be another thinly traded market following the New Year holiday. Global stock marts continued to press higher and Europe is up about 2% at last look. European economic data was gloomy though as manufacturing activity declined sharply. PMI manufacturing for the eurozone slipped to a lower than expected 33.9 in December from a previous 34.5 print. EUR/USD was higher nonetheless as it continued to recover from the overnight rout. The pair added about 30 points and was sitting near 1.3930 just ahead of NY trading. The 1.3880 area looks like the short-term trigger for downside into the intraday lows by 1.3840 here. Things could get very interesting below 1.38 as well.

The yen crosses saw relatively tame price action despite the overall bid tone to stocks. USD/JPY was little changed in London trading and remained just above the 91 mark. The bias remains higher while above this level and a turnaround in US yields -- which are currently a touch lower -- could see a try for the next barrier by 91.50 next. EUR/JPY was up a modest 20 pips in the session and right at the 127 mark. USD/CAD shed more than -70 pips towards 1.2190 despite the modest decline in oil prices to just below the $42/bbl mark. However, with talk that the Wednesday rally in crude was excessive, the risk of a violent reversal in the commodity looms. Look for a break in Loonie through the 55d SMA near 1.2280/90 to signal strength here.

Upcoming Economic Data Releases (NY Session) previous forecast

* 1/2 15:00 GMT US DEC ISM Manufacturing 36.2 35.4

* 1/2 15:00 GMT US DEC ISM Prices Paid 25.5 20.0