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• Euro runs into profit taking at 1.3200
• Yen drifts to 76.00 on Yamaguchi comments
• Nikkei up 0.76% Europe flat
• Oil at $97.26/bbl
• Gold at $1752/oz.

Overnight Eco

• AUD Trade Balance (Dec) 1.17B vs. 1.22B
• AUD Building Permits (MoM) (Dec) -1.0% vs. 2.1%
• CHF Trade Balance (Dec) 2.07B vs. 2.85B
• EUR EU Producer Price Index (MoM) (Dec) n/a
• GBP PMI Construction (Jan) 51.4 vs. 52.8

Event Risk on Tap

• USD Initial Jobless Claims (Jan 28)
• USD Continuing Jobless Claims (Jan 21)
• USD Nonfarm Productivity (Q4) expected at 1.0%

Price Action

• USD/JPY approaches 76.00
• AUD/USD rallies to 1.0750 on better Trade data but falls back to 1.07 by europe
• GBP/USD quiet between 1.5820-5850
• EUR/USD drops through 1.3150 on profit taking

Risk FX came under some profit taking pressure in morning European dealing with EUR/USD stalling ahead of the 1.3200 barrier as it fell to session lows of 1.3122 before stabilizing at 1.3150. With very little economic data on the docket trading was driven mostly by technical rather than fundamental factors.

Both Spain and France held auctions today and although the yields were lower than the period prior and the uptake was full, the bid to cover ratio was a bit lower suggesting somewhat tempered appetite for the sovereign debt. Overall tonight’s auctions were good not great, but nevertheless demonstrate the power of ECB’s LTRO strategy to ease tensions in EU sovereign debt market.

With Greece still unresolved, trading in the EUR/USD is likely to remain rangebound for the rest of the day. On the topside buy stops are clustered above the year to date highs of 1.3220 and on the downside the pair sees bids near 1.3115 which may be tested as the day progresses if risk flows begin to turn negative. After a very strong run over the past few weeks, the euro is clearly stalling at the 1.3200 level as traders await a definitive resolution of the Greek PSI deal and any further delay could trigger more profit taking pushing the pair back to 1.3000.

Meanwhile USD/JPY has continued to drift lower in the wake of last Wednesday uber dovish FOMC statement that suggested the Fed will keep rates low all the way through 2014. As we noted earlier,” That announcement  frustrated  dollar bulls who had been expecting a break out in the pair on the belief that improving US economic data would temper the accommodative policy of the Fed.”

Today, BOJ Deputy Governor Hirohide Yamaguchi said the he didn’t see the need for immediate policy action causing further drop in the pair as it came within a 7 pips of the 76.00 figure. The comments by Mr. Yamaguchi suggest that the BOJ may not immediately intervene near the 75.00 USD/JPY  as it has in the past, perhaps because Japanese monetary officials  feel that the country’s business sector had nearly a year to adjust to the stronger yen regime. Monetary authorities in Japan have always stressed that it is the rate of appreciation rather than the absolute value of the exchange level that precipitated their actions.

Nevertheless, despite Mr. Yamaguchi’s nonchalant attitude the USD/JPY  pair is approaching key support levels near 75.50 and could trigger a cascade of stops that could accelerate its fall. Therefore, this week’s US economic data which includes the NFP and ISM Services report this Friday could prove pivotal to the near term direction of the pair. If US reports shock to the downside the drop in USD/JPY  could prompt a quick change of course from BOJ.   

FX Upcoming

Currency	GMT	EST	Release	Expected	Prior
USD	13:30	8:30	Initial Jobless Claims (Jan 27)		377K
USD	13:30	8:30	Continuing Jobless Claims (Jan 20)		3.554M
USD	13:30	8:30	Nonfarm Productivity (Q4)	1.0%	2.3%

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.