US Fiscal Cliff Deal Hope Rising

Stocks around the world enjoyed solid gains overnight after a Japanese led post-election rally. Many pairs traded at highs at the open Monday and came under profit taking for most of the trading day. EUR/JPY and USD/JPY were the main pairs moving the market and both opened up 100-200 pips higher before giving back most of these gains. Looking ahead, Stock Indices Positions Expire Today at 00:00 GMT.

The Euro (EUR)
The EUR/USD consolidated gains from Friday keeping to a 40 pip 1.3180-40 range. The EUR/JPY led surge is helping the Euro to gain across the board. EUR/GBP is an important cross and we hit 0.8150 briefly before easing overnight. EUR/USD topside target is 1.3368 (Apr 3 High).

The Sterling (GBP)
The British pound was sidelined by profit taking and demand on dips for GBP/USD. Cable hugged the 1.6200 figure for most of the US session and the Asian session so far Tuesday. Looking ahead, November UK CPI forecast at 0.2% vs. 0.5% previously. Also ahead, November Retail Prices forecast at 3.2% y/y.

The Japanese Yen (JPY)
USD/JPY pulled back from Y84.50 to Y83.70 before support was found and we have resumed selling the Yen again today in the Asia. The new Japanese Government will be looking for the BOJ to adopt its 2% inflation target by the end of January.

The Australian Dollar (AUD)
The AUD/USD fell back to 1.0540 from 1.0580 resistance but the market is still bullish and will likely attempt 1.0625 year highs if sentiment remains strong. Some focus on 2013 RBA rate cuts could put a cap on the topside with some banks looking for 1% worth of rate cuts next year.

Oil and Gold (XAU)
Gold is stuck in a $15 range under $1700oz with the recent underperformance not lost on analysts but selling has proven difficult in the last two years. OIL/USD finally gained some traction and is above $88 in Asian trade so far Tuesday with Bulls back in control.

Pairs To Watch
EUR/CHF: To grind higher with 1.200 SNB Safety?

USD/JPY: Uptrend to resume? Target Y85?

TECHNICAL COMMENTARY