EurUsd The signs of fatigue we had been highlighting in EURUSD's rally finally led to a significant break of the 3-week uptrend yesterday, as Trichet failed to strike the hawkish tones that were perceived at the last ECB meeting. With the uptrend negated and a bearish evening star clearly printed on the daily chart, we feel there's plenty of scope for a mass liquidation of speculative longs to clear out some of the overextended positioning; next supports to watch are 1.3575 (25 & 31 Jan low), 1.3540 (24 Jan low), 1.3522 (100-day moving average), 1.3397 (20 Jan low), and 1.3245 (17 Jan low). In spite of our shift to a neutral-to-mildly bearish stance in the short-term, we still hold a very bullish bias over the medium-and long-term so would be looking to reload longs back around 1.3400. Key levels to beat on the topside will be the 1.3861 high seen early Wednesday, (61.8% fibonacci retracement of the entire sell-off from 1.5145 to 1.1876), 1.3975 (9 Nov high), the psychologically important 1.4000 level, 1.4085 (8 Nov high) and 1.4281 (4 Nov high). In spite of our shift to a neutral-to-mildly bearish stance in the short-term, we still hold a very bullish bias over the medium-and long-term. Key levels to beat on the topside will be the 1.3861 high seen early yesterday, (61.8% fibonacci retracement of the entire sell-off from 1.5145 to 1.1876), 1.3975 (9 Nov high), the psychologically important 1.4000 level, 1.4085 (8 Nov high) and 1.4281 (4 Nov high).

GbpUsd GBPUSD has pared back lower in sympathy with EURUSD over the last 24 hours, sliding from highs of 1.6278 down to support at 1.6122. A key difference between the GBPUSD chart and the EURUSD chart however, is that GBPUSD's current uptrend channel is still intact (lower boundary currently comes in at 1.6080), so it's still possible we see a decent recovery rally today. Resistance levels remain sparse on the topside; the nearest on being 1.6300 (4 Nov high), with another long gap until 1.6460 (19 Jan 2010 high) and 1.6515 (7 Dec high). Should the market need a deeper correction lower to clear out stale longs then noted levels below us are 1.6120 (yesterday's low), 1.6080 (lower edge of uptrend channel), and 1.6005-20 (sticky area of former resistance). Other supports seen at 1.5823 (31 Jan low), 1.5751 (which caught the sell-off after the GDP release), and 1.5718 (13 Jan low).

UsdJpy Not a lot of change to the USDJPY outlook today; after testing the lower edge of the current 3-week downtrend channel (around 81.30) earlier this week, USDJPY managed to rebound somewhat -but not very far. Rallies have been anaemic (high yesterday 82.06), so we are hoping for a bit more upside to present an opportunity to sell. Pockets of supply are still noted around 82.25 (31 Jan high), 83.00 (psychological resistance), 83.21 (27 Jan high), 83.50 (11 Jan high), 83.70 (7 Jan high), and the formidable old range ceiling from early December at 84.40. This latter level managed to contain numerous rallies back on 29 Nov, 1 Dec, 2 Dec, 8 Dec, 13 Dec and 16 Dec -so it's likely to be a stubborn barrier on the first test. Should we break below Wednesday's 81.31 low, next support levels are seen at 81.15 (lower edge of downtrend channel), 80.95 (31 Dec low), 80.53 (9 Nov low) and 80.24 (31 Oct low) -but then we have nothing but thin air until the all-time low from 1995 at 79.75.

UsdChf The wave of USDCHF strength was fanned further by yesterday's EURUSD sell-off, hitting a high of 0.9525. This development is significant because it not only broke the reigning 3-week downtrend channel, but also appears to have activated at an inverse head & shoulders pattern on the hourly chart with a neckline at 0.9455 and a target of 0.9580. Next resistance levels are now eyed at 0.9520 (former support turned resistance), 0.9687 (14, 20 & 21 Jan highs), 0.9701 (100-day moving average), 0.9784 (11 Jan high), and 0.9850 (12-13 Dec highs). Should this be a false break, then the bears will have to push us back below 0.9455 and preferably, back below the former trendline (currently 0.9425) to keep hopes alive of another assault on the all-time low 0.9301. Earlier this week we touched a low of 0.9331 but we'd prefer to wait for the 0.9301 level to break before we initiate any fresh short trades. Once 0.9301 has broken, the risk-reward profile would look far more attractive, and the entry levels less significant compared to the sprawling downside below.