The EUR-GBP-JPY Currency Outlook Jan 8, 2013

FXEmpire   |  January 8 2013 3:25 EST

By FXEmpire.com

On Monday, global markets started the new trading week quietly. There were very few eco data and markets had found a new equilibrium after the US payrolls report. EUR/USD was initially under some moderate downward pressure, but a test of the recent lows failed. In technical trade, the pair returned north of the 1.31 mark by the close. The JPY gained a bit make a small correction after traders drove prices down to record lows.

Speculators today will get the economic confidence data of the EU, the EMU November retail sales and unemployment rate and the German factory orders. The EC confidence indicators and the German factory orders have most potential to move the (currency) market. Even so, the impact will be of intraday significance, at best. In the US, the NFIB small business confidence is also interesting. Of late, the fiscal cliff weighed on small business confidence. Stabilization at a low level is expected. Once again, dont expect the report the change the global picture for the dollar

The USD/JPY showed additional signs that the recent rally is losing some momentum. The USD/JPY tested last weeks highs (88.40 areas) at the start of trading in Asia. However, the rally was blocked, even as there were still plenty of headlines on more unconventional measures to come to support the Japanese economy. Sentiment on risk also turned a bit less volatile after the recent gains. All this provided a good excuse for some short-term profit taking on USD/JPY longs. The pair drifted to the 87.65 area. . After the recent strong gains, some further temporary correction/consolidation in USD/JPY might be on the cards. Short-term, stop loss protection/partial profit taking on USD/JPY long exposure can be considered. Longer term, we maintain our USD/JPY positive bias and look to (re)buy in case of a more pronounced correction. 86.50 is a first important support area. Further support is seen in the 85.65 area.

The GBP followed the global market themes bouncing off earlier bottoms of 1.6050 range to recover to 1.611 with the EUR/GBP there was still no clear theme to guide the EUR/GBP price action. The global performance of the euro and the technical considerations prevailed. The pair was captured in a sideways consolidation pattern in the lower half of the 0.8100 figure. Overnight, the BRC Like-for-like sales came out slightly lower than expected, at 0.3% Y/Y (0.5% Expected). The impact on EUR/GBP and the GBP/USD trading was limited. The pair remained well bid, but this was in the first place due to overall euro strength after Japanese FM Aso announced its intention to buy euro denominated bonds.

The UK calendar is again thin. So, trading in the GBP might still be driven by technical considerations. The downside in this cable and its cross rate looks a bit difficult without further news. Traders are eagerly awaiting Thursdays central bank meetings.

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Originally posted here