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EUR quiet before EZ FinMin meeting, EM debasing

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There is little risk appetite in the FX markets before Euro-zone Finance Ministers meeting (at 16:00 GMT) on Greek situation. Greece reiterates to not be willing to extend the bail-out package no matter how much Germany insists, looks to negotiate terms and procedures for the existing debt payment. EURUSD traded in the tight range of 1.1310/31 in Asia, volumes were tight due to Tokyo holiday. Technicals are favorable for short-term pick-up to 1.1445/1.1534 (Fibonacci 23.6% on Dec’14-Jan’15 drop / post-Jan 22nd high) yet traders remain seller on rallies as long as uncertainties on Greece persist. Option barriers trail below 1.15 in preparation to today’s event risk. EURGBP trades tight above 0.74 support. Option offers keep the pressures downwards below 0.7450/0.7500.

Higher US sovereign yields pushed USDJPY above the Ichimoku cloud top (119.05) in New York yesterday. Overnight’s low volumes kept upside attempts contained. With positive momentum picking up, attention shift to Dec highs (120.83/121.85) as resistance at 120.00 weakens. We see potential to clear out 120 resistance should the US yields remains sustained. Option calls trail above 118.00 and should help paving the way to 120.83/121.85 (year Dec’14-Jan’15 resistance). EURJPY steps above its 21-dma (134.71) for the first time since Dec’14. Broad EUR-appetite will determine whether the bullish attempt will turn into a more sustainable short-term correction.

AUD/USD bulls have hard time gaining momentum. Home loans and investment lending surged significantly in December on expectations that RBA would ease policy (which actually happened). The overheating in Australian house market will certainly be back in focus and slowdown the AUD-debasing approaching 75 cents. In the shortest term however, Thursday’s jobs report keep AUD-bulls contained. Formation of inverted hammer confirms market is looking to determine a bottom. AUDNZD gains bearish momentum on lower-low-lower-highs pattern, heading toward January low of 1.0355.

Well sustained above the 50-dma (11.5464), USDZAR extends gains to 11.7544 on weaker commodity markets amid China CPI falls faster-than-estimates and G20 draft warns on prolonged period of weak demand and low inflation. Published yesterday, the unexpected improvement in manufacturing production (+2.3% m/m in Dec) combined to lower unemployment (from 25.4% to 24.3%) failed to revive ZAR-bulls. Traders are focused on gold, mining and production data (due Feb 12th) as selling pressures weigh heavier on ZAR.

In Turkey, USDTRY traded to fresh record high of 2.5071 yesterday as investors question Central Bank’s independence amid political leaders’ unprecedented pressures for lower TRY rates. News that the Governor Basci moved out from his government-owned house has revived speculations that the CB leader may be pulled out of the game. And if such scenario materializes, the short and long horizon investors will inevitably rush to the exit. The inversion in TRY-denominated sovereign curve confirms the rising stress on TRY bonds. We remain on sidelines in TRY as volatilities rise. The 1-month USDS/TRY implied volatility rises above 15%.

We have a light economic calendar today, traders watch Swedish January Unemployment, Norway 4Q GDP q/q, US February 6th MBA Mortgage Applications and US January Budget Statement.

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