France Downgrade Rumor Hurts EUR

Mild profit taking led to downside across most markets overnight with investors turning cautious ahead of the ECB meeting today. US Consumer Credit increased more than expected to $16bn vs. $12.7bn forecast. USD/JPY continued its correction lower overnight and breached Y87 late in the New York. Looking ahead, Crude Oil Inventories previously at -11.1mn.

The Euro (EUR)
The buying from 1.3000 fizzled out at 1.3140 even with the announcement by Japanese FM that Japan would be buying European bonds via an investment in the ESM (Rescue Fund). There was no appetite for a further rally and when France downgrade rumors swept the market we saw day lows near 1.3060. EUR/JPY is key for daily direction recently and has been easing from Y116 to Y113.50 overnight.

The Sterling (GBP)
The cable was on the back foot with the euro falling down below 1.6050 before support was found and we stabilized just above the support. GBP/JPY selling added to weight overnight as we broke below Y140. Looking ahead, UK November Trade Balance forecast at 9bn vs. 9.5bn previously. November Germany Industrial Output forecast 1% vs. -2.6% previously.

The Japanese Yen (JPY) USD/JPY continued to ease lower falling below Y87 with traders taking profit ahead of Friday’s emergency stimulus budget. A lot of yen crosses are under pressure technically and we could be in for more losses if the major continues to break support.

Australian Dollar (AUD)
The AUD/USD continued to orbit the 1.0500 level with sellers at 1.0525 capping but support at 1.0480 is also proving very solid. EUR/AUD has been pushing to the downside falling from 1.2500 to 1.2440 overnight as the aussie holds up better than the EUR/USD. November Trade Balance forecast at -2637mn vs. -2300mn forecast with imports outpacing exports. Looking ahead, November Retail Sales forecast at 0.3% vs. 0.0% previously.

Oil and Gold (XAU)
Gold was strong all day grinding back to $1660 with buyers tentatively returning to the market after last week’s ravaging to the downside. Oil spent most of the day above $93 in quiet trade consolidating recent gains.

Pairs To Watch
EUR/USD: ECB meeting ahead to limit movement?

USD/JPY: Broke overnight Y87 is upside over?

TECHNICAL COMMENTARY