Risk Aversion will dominate proceedings today

<p>GBP/USD Range: 1.6318 – 1.6360 Support: 1.6250 Resistance: 1.6450 Sterling is holding up reasonably well considering the risk aversion we are seeing especially with extremely […]</p>

Range: 1.6318 – 1.6360
Support: 1.6250
Resistance: 1.6450
Sterling is holding up reasonably well considering the risk aversion we are seeing especially with extremely poor consumer data that was released yesterday with the UK CBI retail sales surprising to the downside at -5 from a consensus of +2 expected. With eur/gbp now below 0.8800 Sterling could be dragged around by the risk trade, EUR/GBP and of course let’s not forget the month end fixes coming to the market in coming sessions.
Range: 1.4265 – 1.4364
Support: 1.4250
Resistance: 1.4550
With risk aversion dominating the market of the past few forex sessions it hasn’t been a surprise to see vast and volatile moves in this pair as the ugly currency contest continues into extra time. On one side of the Atlantic we have yet another delay on the Boehner debt plan vote with an emergency meeting called for 10am EST today by the US house to ‘assess the path forward‘. This pushed the Dow Jones lower towards the close last night and dollar weakness versus the announcement this morning that the ratings agency Moody’s had put Spain’s Aa2 rating on review for a possible downgrade. We do have some data in the form of US GDP and the Chicago PMI but I believe this will be a secondary driver as the US debate will take the spotlight again today.
Range: 77.45 – 77.86
Support: 77.20
Resistance 78.30


With risk aversion the theme it wasn’t a surprise to see the JPY strengthen overnight much to the annoyance of the BOJ and MOF. Japan’s Finance Minister Noda is stepping up the rhetoric on the JPY saying the government will take decisive action if market moves are excessive and disorderly, and that JPY is too strong and deviated from the levels suggested by fundamentals. The comments suggest the MOF may take action if the US debt ceiling and European peripheral problems appreciates the JPY further.

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