Risk off as European woes continue as we look at inflation from the UK and US

<p>  GBP/USD Range: 1.5755 – 1.5826 Support: 1.5740 Resistance 1.5980   Sterling continues to trade under pressure as the risk off environment dominates the market […]</p>


Range: 1.5755 – 1.5826
Support: 1.5740
Resistance 1.5980


Sterling continues to trade under pressure as the risk off environment dominates the market across the board. Cable is trading at three-week lows with only EUR/GBP stopping the Queen’s currency from falling further. Today at 9.30am (UK time) we will see the release of UK jobs data, with the unemployment rate expected to increase from 8.2% to 8.1% but this data will be secondary to the inflation report released at 10.30am with speculation rife that the BoE will cut growth forecasts to 1% from 2% for 2012 and signal more QE will follow in the coming months. This is all very bearish for sterling but the market is short and traders may think that this could be a classic ‘sell the rumour buy the fact’ scenario.
Range: 1.3435-1.3540
Support: 1.3405
Resistance: 1.3610
Tensions in Europe remain high as contagion fears increase in Northern Europe with yield spreads widening in France, Belgium and Austria on rumours that an Austrian downgrade from AAA is imminent. Note Moody’s visit to Austria next week. The 1.3480 level was broken in the Asian session, with 1.3405-1.3410 seen as the next support as the market eyes the October lows of 1.3145. We have seen the market typically short euro for much of the week and so traders should be aware of potential position adjustment on any positive European comment. That said, recent price trends indicate traders continue to sell into market rallies.
Range: 76.95-77.15
Support: 76.30
Resistance: 77.80
The yen continues to trade in tight ranges as intervention fears remain, but with EUR/JPY dropping below 104.00, the pressure remains on the BoJ and a strong yen. The BoJ left the target rate unchanged overnight at 0%-0.01% by a unanimous vote and announced no new monetary easing steps. The Bank did, however, cut its economic assessment sighting a global slowdown, a strong yen and the recent floods in Thailand.

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