On the data front, the US Chicago Fed national activity index came in slightly better, while Eurozone consumer confidence also showed some improvement. However, the Euro was weighed down for the most part, with many citing the latest Moody’sreport which warned that slower growth could lead to European ratings downgrades. Meanwhile, US equities could not hold onto any gains, and this helped to weigh more heavily on the Yen crosses, with Eur/Jpy breaking back into the 1.0700’s and threatening a retest of the yearly lows down by 107.30.
Finally, fears that a hung parliament in Australia would be disastrous for the Aussie have been put to rest, with the higher yielding currency trading relatively unchanged on Monday following some whipsaw price action early on. Overall, the technical outlook continues to favor additional USD strength against most of the major currencies, while we would also not rule out the possibility for a sizable USD correction against the Yen and Swissie over the coming days. With respect to Usd/Jpy, we see risks for one more move to the downside before the onset of a major capitulation.
Looking ahead, German GDP (2.2% expected) is due at 6:00GMT, followed by UK BBA loansfor house purchases at 8:30GMT. Eurozone industrial new orders (1.5% expected) cap things off for European trade at 9:00GMT.
Written by Joel Kruger and Jonathan Granby
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