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Euro in focus ahead of ECB

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USD/JPY and some of the JPY crosses moved up whilst others traded soggy. USDJPY was better bid from the get-go, helped out by higher US yields, the modest Wall St rally and continuing short-covering from last night’s 117.18 spike low. Pre-118.00 offers were absorbed without effort and trader stops above tripped to 118.16. It fell back below 118.00 as the Nikkei fell into the red before another rush higher to 118.34 despite the still soggy Nikkei. EURJPY traded up from 136.78 to 137.31 as more shorts covered ahead of tonight’s ECB announcement. GBPJPY rose modestly too from 178.31 to 179.16 despite lower UK yields after BoE minutes which saw the two rate hawks move back into the neutral camp. AUDJPY and NZDJPY were better offered after the surprise BoC ease with RBA and RBNZ rate cut speculation on the rise. AUDJPY traded soggy between 95.18-58 and NZDJPY between 88.82-89.28. Disappointment over the lack of more BoJ action yesterday looks to have abated, and JPY direction looks more a matter of moves in other currencies.

EUR/USD and most of the EUR complex did little in Asia, consolidating ahead of the ECB policy announcement tonight. The extent of QE and whether it will be the ECB or national central banks doing the bond buying remain the foci. QE below E1 trln looks to disappoint after the “leak” overnight of E50 bln/month. EURUSD saw some to-fro action but within a relatively tight 1.1592-1.1629 range. Large, E1.2 bln in option expirations at 1.1600 helped anchor the market down. Bids remain between 1.1590-1.1600 and offers from @1.1630. Resistance is eyed at yesterday’s 1.1680 high and ahead of 1.1700. EURGBP did little, holding between 0.7656-76. EURCHF was likewise quiet between 0.9988-1.0003. EURJPY saw a push up from 136.78 to 137.31 on renewed JPY sales. Short-covering was seen in EURJPY and EUR/AUD, the latter up from 1.4320 to 1.4402.

GBP/USD see-sawed between 1.5134-59, slightly better bid despite the BoE MPC’s more neutral rate stance.

USD/CHF was better bid, up from 0.8589 to 0.8651 in sympathy with USDJPY and in thin conditions.

AUD/USD closed in New York at 0.8084 after the surprise BoC rate cut overnight and speculation of an RBA move. Tentative moves to rebound were stymied at 0.8109 and the pair fell back to through last night’s 0.8077 low to 0.8056. Soggy commodities markets helped. Support below is eyed at 0.8030-40, 0.8033/36 a double low on January 7/5. Large option expirations at 0.8015/35 should help. inturn set to bolster. Offers have been lowered from 0.8250 to 0.8150.

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