Consolidation Day For FX Pairs

It has been a range-bound session for the majors as a lack of economic releases coupled with the absence of new sovereign debt headlines allowed risk assets to stabilize somewhat. For now, the panic element that had fuelled EURUSD's plunge has subsided, but worries surrounding the PIGS (Portugal, Ireland, Greece and Spain) are by no means gone, leaving EURUSD stable but still heavy around 1.3695 levels. Gold has also conceded some of its morning rebound gains (that had seen it trade up to $1173.50), and has now dropped back to $1172 levels, having been as low as $1161.90 on the lower open in US equities.

The only economic data from the majors was Swiss unemployment and retails sales, both of which were broadly encouraging. The unemployment rate came in at a seasonally adjusted 4.1%, lower than the 4.3% forecast and down on the prior month's 4.2% reading. Retail sales were also impressive at 4.7% YoY (compared with 0.6% last), although this has historically been a rather volatile figure. USDCHF has drifted gradually lower throughout the day, and is currently testing the lows around 1.0695; however the 1 month uptrend support coming in at 1.0675 will likely hold on the first visit.

Looking ahead to tomorrow's calendar, there will only be a slight uptick in activity on the data release front. In the morning, expect German CPI and UK trade balance figures, followed by US wholesale inventories in the afternoon. We doubt that these events are capable of being the core drivers of any FX moves, with markets prone to be far more sensitive to sovereign debt headlines, equity market performance and technical factors.

AC Markets
http://www.ac-markets.com

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