Month-end rebalancing likely to dominate FX markets

<p>The EU meeting and the next tranche of aid being granted to Greece seems to have created a classic buy the rumour sell the fact […]</p>

The EU meeting and the next tranche of aid being granted to Greece seems to have created a classic buy the rumour sell the fact scenario in FX risk space with the USD strengthening across the board bar the JPY with a technical failure of 1.3045 and a negative close pointing to a test of 1.2800 in coming days as the single currency remains in the 1.2800-1.3100 broader range.

The risk off sentiment has continued into the Asian session taking equities lower as fiscal cliff concerns return to investors minds not helped by comments from Senate majority leader Reid that he was disappointed with lack of progress and the time for ‘ happy talk ‘ was over and must give way to discussing specifics.

The price action doesn’t look constructive for the risk FX trade but as so often seen in 2012 this is just when the market is about to turn so I’m going to use 105.50 in EUR/JPY as a line in the sand in the short term with month end rebalancing flows likely to dominate today with the spot value being month end. Initial signs of these flows point to a USD buying bias.

Today’s data highlight will be the Fed’s Beige book report on the current economic conditions at 7pm this evening.

 


EUR/USD

Supports 1.2905-1.2875-1.2800 | Resistance 1.2995-1.3025-1.3045


USD/JPY

Supports 81.70-81.40-80.80 | Resistance 82.25-82.50-82.80


GBP/USD

Supports 1.5980-1.5965-1.5910 | Resistance 1.6025-1.6055-1.6085

 

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