• Fear and uncertainty take hold of markets
• Price action reminiscent of Bear and Lehman
• Investors continue to price in probability for Greek exit
• Euro still eyes retest and break of 2012 low
• Bank of Japan leaves policy on hold as widely expected

There is nothing more poisonous for markets than fear and uncertainty. The ongoing turmoil in the Eurozone has done a good job of fueling this panic. Market participants can hardly think clearly right now and the environment is extremely reminiscent of the environment in the US markets in the early crisis during the Bear Stearns and Lehman collapse. There seems to be a complete lack of confidence in the ability for European leadership to come up with a solution on Greece, and the longer this takes, the more investors will price in the probability of an exit from the Euro. In fact, now it seems as though the question is not whether Greece will exit, rather how messy the exit will be?

The resulting price action has seen resurgence in broad based buying of the US Dollar and Yen on a flight to safety, while risk correlated assets are aggressively sold. Any rebound in the early week following some already aggressive risk selling in recent sessions has already been well offered, and the risks from here continue to be tilted to the downside. In fact, it is actually rather surprising that the Euro has not yet broken down through the yearly lows from January at 1.2625, and once this level is actually taken out, then look out below. The EU Summit later today could inspire some fresh volatility, and we will be watching closely for any positive developments. Still, we recommend that market participants take to the sidelines and patiently wait for the panic and fear to subside.

Elsewhere, the Bank of Japan has come out and left policy on hold as was widely expected. While the central bank did cite ongoing risks to the global economy, perhaps some upbeat comments towards the local economy were poorly mistimed given the escalation in global fear over the past 24 hours and recent Fitch downgrade of Japan. Unfortunately for the administration, this will only add to additional upside pressure on the Yen, which still trades rather close to its record highs against many currencies.

Technically, risk correlated assets are already well oversold on the daily charts, and it will be interesting to see just how stretched these markets can get before any sign of rebound. Aussie and Kiwi have both dropped to fresh multi-day lows against the buck, and yet both of these currencies are already well oversold on the short-term charts. The Euro is also oversold and yet, given the fundamental outlook above, things could still get much uglier. Normally, we might recommend looking to fade the risk off trade, but given just how scary markets are right now, the best place is probably on the sidelines. It is true that there is no money to be made on the sidelines, but sometimes, the best trade is no trade at all.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD:The market remains under intense pressure and the focus for now is squarely on a retest and break of the 2012 lows from January at 1.2625. While we would not rule out a possibility of a sustained break below this level over the coming sessions, short-term technical studies are correcting from oversold and are showing a need for some form of a bounce from where a fresh lower top is sought out. Ultimately however, any rallies should now be very well capped by previous support turned resistance at 1.3000 in favor of additional weakness over the medium-term that projects deeper setbacks into the lower 1.2000's.

USD/JPY:The market continues to consolidate around 80.00 and is in the process of looking for a medium-term higher low ahead of the next major upside extension back above the yearly highs at 84.20 and towards 90.00 further up. However, for the time being it remains in question whether the market will still head lower towards the 200-Day SMA by 78.50 before ultimately reversing higher. The key level to watch above comes in by 80.60, and a break and close above this level will officially alleviate downside pressures and suggest that a higher low has now been carved in the 79.00's.

GBP/USD:The market remains under intense pressure since breaking back below 1.6000 and setbacks could now extend towards next key support in he 1.5600 area over the coming sessions. Still, daily studies are now stretched and we would prefer looking to sell into rallies towards 1.6000 where a fresh lower top is sought out.

USD/CHF:Overall the structure remains highly constructive and we continue to project additional upside over the coming months back above parity. For now, the latest break and close above 0.9335 is expected to accelerate gains for a retest of the yearly highs by 0.9600, while any intraday pullbacks should be very well supported ahead of 0.9200. Ultimately, only back under 0.9000 would negate outlook and give reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

- Risk correlated assets looking for short-term relief

- Global equities very well offered and in need of bounce

- No fundamental catalyst for risk reversal as of yet

- G8 Summit fails to inspire any renewed optimism

- Eurozone leadership will scramble to avoid Greek exit

Risk correlated currencies will certainly be looking for some relief this week after taking huge hits over the past several days to leave short-term technical studies well oversold. Global equities will also welcome some form of a bounce as they too are well stretched. However, at this point, there is no fundamental catalyst to speak of that could really justify such resurgence in risk appetite. The Euro has managed to find some suspicious bids in recent trade, after stalling ahead of the 2012 lows from January, while other currencies have also found similar bids into Monday.

The G8 Summit has come and gone and as was widely expected (at least from our end), the meeting proved to be a non-factor in terms of coming up with any material solutions on Greece and the Eurozone crisis. From here, there will be a lot of pressure on Eurozone leadership and the European Central Bank to take action to find a credible solution that will not compromise the current Eurozone structure. As we outlined in the previous week, while a Greek exit alone would not necessarily be the worst thing, the impact and symbolic message from such an exit would be far worse, as it would open the door for contagion and a potential exit from other peripheral Eurozone countries.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD:The market remains under intense pressure and the focus for now is squarely on a retest of the 2012 lows from January at 1.2625. While we would not rule out a possibility of a test of this level over the coming sessions, short-term technical studies are well oversold and are showing a need for some form of a corrective bounce from where a fresh lower top is sought out. Ultimately however, any rallies should now be very well capped by previous support turned resistance at 1.3000 in favor of additional weakness over the medium-term that projects deeper setbacks into the lower 1.2000's.

USD/JPY:The market continues to consolidate around 80.00 and is in the process of looking for a medium-term higher low ahead of the next major upside extension back above the yearly highs at 84.20 and towards 90.00 further up. However, for the time being it remains in question whether the market will still head lower towards the 200-Day SMA by 78.50 before ultimately reversing higher. The key level to watch above comes in by 80.60, and a break and close above this level will officially alleviate downside pressures and suggest that a higher low has now been carved in the 79.00's.

GBP/USD:The market remains under intense pressure since breaking back below 1.6000 and setbacks could now extend towards next key support in he 1.5600 area over the coming sessions. Still, daily studies are now stretched and we would prefer looking to sell into rallies towards 1.6000 where a fresh lower top is sought out.

USD/CHF:Overall the structure remains highly constructive and we continue to project additional upside over the coming months back above parity. For now, the latest break and close above 0.9335 is expected to accelerate gains for a retest of the yearly highs by 0.9600, while any intraday pullbacks should be very well supported ahead of 0.9200. Ultimately, only back under 0.9000 would negate outlook and give reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

• Panic, fear and uncertainty take hold of markets
• Euro looking to establish below 2012 lows from January
• Yen starts to find renewed bids on flight to safety status
• Eurozone political turmoil fuels intensified risk off trade
• Rating agency downgrades and Greek political developments weigh

The risk liquidation continues into Friday, and markets to this point have shown no real interest in any form of a bounce. The US Dollar and Yen have been the prime beneficiaries on their flight to safety status, while the Swiss Franc is still not participating given the aggressive SNB intervention measures. We wonder how much it is costing the SNB to keep the EUR/CHF cross propped above 1.2000, especially in these intense risk-off markets. At this point, the Euro should accelerate to test the yearly lows from January by 1.2625, although any additional declines from there would be hard to comprehend in light of the severely oversold daily technical studies.

Elsewhere, US equities are now testing some key support levels, while gold has finally found some bids ahead of $1500. It certainly isn’t common to see so many analysts bearish on the Euro and risk in general. We have seen even the most aggressive Euro bulls retract their positions, and these include some larger banks, hedge funds and even central banks.

Moving on, Moody’s downgrade of 16 Spanish banks, along with Spanish yields rising back above 6% has not helped matters, while comments from Greek SYRIZA leader Tsipras that his party will not join the any pro-bailout coalition only weighs further on risk sentiment. European leadership needs to step up and offer a solution; otherwise, we could see additional risk liquidation over the coming hours. It is more than likely that the burden will fall on the European Central Bank, and the introduction of a Eurobond or additional bond buying could offer some relief. Other tools at the ECB’s disposal include the LTRO and the ability to cut rates, both of which would also likely be viewed as a risk positive. One thing is for sure, the G8 Summit kicks off today and we should expect nothing from this front in terms of any helpful solutions.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD:The market remains under intense pressure and the focus for now is squarely on a retest of the 2012 lows from January at 1.2625. While we would not rule out a possibility of a test of this level over the coming sessions, short-term technical studies are well oversold and are showing a need for some form of a corrective bounce from where a fresh lower top is sought out. Ultimately however, any rallies should now be very well capped by previous support turned resistance at 1.3000 in favor of additional weakness over the medium-term that projects deeper setbacks into the lower 1.2000's.

USD/JPY:The market continues to consolidate around 80.00 and is in the process of looking for a medium-term higher low ahead of the next major upside extension back above the yearly highs at 84.20 and towards 90.00 further up. However, for the time being it remains in question whether the market will still head lower towards the 200-Day SMA by 78.50 before ultimately reversing higher. The key level to watch above comes in by 80.60, and a break and close above this level will officially alleviate downside pressures and suggest that a higher low has now been carved in the 79.00's.

GBP/USD:The market remains under intense pressure since breaking back below 1.6000 and setbacks could now extend towards next key support in he 1.5600 area over the coming sessions. Still, daily studies are now stretched and we would prefer looking to sell into rallies towards 1.5900 where a fresh lower top is sought out.

USD/CHF:Overall the structure remains highly constructive and we continue to project additional upside over the coming months back above parity. For now, the latest break and close above 0.9335 is expected to accelerate gains for a retest of the yearly highs by 0.9600, while any intraday pullbacks should be very well supported ahead of 0.9200. Ultimately, only back under 0.9000 would negate outlook and give reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

• Eurozone leadership needs to step up now
• Impact of Greek exit would be catastrophic
• Currencies oversold and still in need of some corrective action

We have now reached a point where a serious emergence of leadership in the Eurozone is needed. While some would argue that a Greece exit would be best, as it would rid the rest of the Eurozone from having to deal with the Greek financial crisis, we contend that a Greek exit would be catastrophic, as it would only open the door for exits by other ailing economies within the Eurozone. It is true that in the grand scheme, Greece is a rather small threat to the broader economy, but if investors started to expect such exits from other countries as a result, this would truly be an unwelcome development which would significantly undermine the Euro’s prospects.

As such, we feel that the proper response, in the interests of stability, is for Eurozone leadership to act fast and make the necessary commitment to ensure that they will be there through the worst of times, despite the costs associated with such a commitment. It is easy to stay loyal and show commitment when it is not needed, but it is in times of crisis when one is really tested to step up and back up convictions. Now is the time for European leadership to step up and swallow whatever necessary to keep the local and global economy from slipping deeper into the abyss. One of the major critiques of the Eurozone is the ability for so many different countries to stand together under one economic umbrella. Clearly this is now being tested, and the only way to respond, is through a unified commitment at whatever the cost.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD:The market remains under intense pressure and the focus for now is squarely on a retest of the 2012 lows from January at 1.2625. While we would not rule out a possibility of a test of this level over the coming sessions, short-term technical studies are well oversold and are showing a need for some form of a corrective bounce from where a fresh lower top is sought out. Ultimately however, any rallies should now be very well capped by previous support turned resistance at 1.3000 in favor of additional weakness over the medium-term that projects deeper setbacks into the lower 1.2000's.

USD/JPY:The market continues to consolidate around 80.00 and is in the process of looking for a medium-term higher low ahead of the next major upside extension back above the yearly highs at 84.20 and towards 90.00 further up. However, for the time being it remains in question whether the market will still head lower towards the 200-Day SMA by 78.50 before ultimately reversing higher. The key level to watch above comes in by 80.60, and a break and close above this level will officially alleviate downside pressures and suggest that a higher low has now been carved in the 79.00's.

GBP/USD:The latest daily close below 1.6050 now opens the door for an acceleration of declines over the coming days back down towards next key support in the 1.5800's. At this point, look for any intraday rallies to be very well capped ahead of 1.6200, while only back above 1.6300 would negate outlook and give reason for pause.

USD/CHF:Overall the structure remains highly constructive and we continue to project additional upside over the coming months back above parity. For now, the latest break and close above 0.9335 is expected to accelerate gains for a retest of the yearly highs by 0.9600, while any intraday pullbacks should be very well supported ahead of 0.9200. Ultimately, only back under 0.9000 would negate outlook and give reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

• Ongoing turmoil in Greece pressures markets lower
• Fear of contagion to larger EX economies weighing
• Technical studies are however stretched
• Investors looking to retest Euro 2012 lows
• Looking for technical bounce before trend continuation

The latest bout of intensified selling in the Euro has been attributed to the ongoing political turmoil in the Eurozone.Currencies in general have followed suit, and are under pressure against the buck. With no clear resolution in sight for Greece, and new elections on the horizon, many now fear the worst and the possibility of a Greek exit is looking more realistic with every passing day. However, while the possibility is increasing and panic and uncertainty are running high on threat of contagion to larger Eurozone economies. We still do not see the markets at risk for a material sell-off from current levels before a technical correction.

We contend that the latest bout of risk-off trade has been driven more by technical selling, resulting from a daily close below 1.3000 in the Euro several days back, which now has traders setting sights set on a retest of the 2012 lows from January at 1.2625. However, given how severely overextended markets are at present, there should soon be some relief, at least for a little while, before risk liquidation continues. We often find that the middle of the week brings a reversal during periods of intense volatility, and we suspect that the US Dollar may find a top today before selling off into the remainder of this week and the next. Looking ahead, there is a good deal of economic data on tap, although we suspect attention will be focused to the FOMC Minutes due out later in the day.

Technical outlook:

EURUSD - The market remains under intense pressure and the focus for now is squarely on a retest of the 2012 lows from January at 1.2625. While we would not rule out a possibility of a test of this level over the coming sessions, short-term technical studies are well oversold and are showing a need for some form of a corrective bounce from where a fresh lower top is sought out. Ultimately however, any rallies should now be very well capped by previous support turned resistance at 1.3000 in favor of additional weakness over the medium-term that projects deeper setbacks into the lower 1.2000's.

USDJPY - The market continues to consolidate around 80.00 and is in the process of looking for a medium-term higher low ahead of the next major upside extension back above the yearly highs at 84.20 and towards 90.00 further up. However, for the time being it remains in question whether the market will still head lower towards the 200-Day SMA by 78.50 before ultimately reversing higher. The key level to watch above comes in by 80.60, and a break and close above this level will officially alleviate downside pressures and suggest that a higher low has now been carved in the 79.00's.

GBPUSD - The latest daily close below 1.6050 now opens the door for an acceleration of declines over the coming days back down towards next key support in the 1.5800's. At this point, look for any intraday rallies to be very well capped ahead of 1.6200, while only back above 1.6300 would negate outlook and give reason for pause.

USDCHF - Overall the structure remains highly constructive and we continue to project additional upside over the coming months back above parity. For now, the latest break and close above 0.9335 is expected to accelerate gains for a retest of the yearly highs by 0.9600, while any intraday pullbacks should be very well supported ahead of 0.9200. Ultimately, only back under 0.9000 would negate outlook and give reason for pause.

• Currencies, equities and commodities under intense pressure
• Eurozone political turmoil fuels more panic and uncertainty
• China slowdown also gaining momentum and contributing to risk off trade
• Euro testing key technical fib level off of the yearly low-high move

The risk liquidation has continued with full force into the new week as currencies, global equities and commodities all come under intensified pressure. For now, it seems as though the ongoing uncertainty in the Eurozone, highlighted by Greek political turmoil and opposition to pre-existing bailout and austerity agreements, has been the primary driver of the flight to safety trade. However, signs of material cooling in China are not far behind and have unquestionably contributed to the fear and panic currently in the market.

The Euro has broken down to the 1.2800 area and at this point there is no sign of any fundamental relief. Nevertheless, it is worth noting that technical studies are now oversold on the daily chart, and with the price stalling by a key 78.6% fib retrace off of the yearly low-highs, we could be very close to seeing some form of a corrective bounce. But for the time being, the US Dollar is king, and market participants are likely to continue to look to buy the Greenback across the board on its lure of safety and a prospective narrowing in yield differentials as the US emerges first from the global crisis.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market has finally cleared some key support by 1.3000 and the break opens the door for deeper setbacks over the coming days towards the 2012 lows from January at 1.2620. However, short-term technical studies will need to unwind from oversold readings before we are to see any extended declines below 1.3000, and we recommend looking to sell into rallies into the 1.3000-1.3100 where a fresh lower top is now sought. Look for a potential bounce by the 78.6% fib retrace off of the yearly low-high move which comes in by 1.2800. Ultimately, only back above 1.3300 would delay.

USD/JPY: The latest pullback from the 2012, 84.20 highs is viewed as corrective and it looks as though the market could still see a bit more weakness before considering the possibility for the formation of a medium-term higher low. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.

GBP/USD: Finally starting to see signs of a medium-term top and potential 2012 high after the market has stalled and retreated from the 1.6300 area. Key support now comes in by 1.6050 and a break and close below this level will confirm bearish bias and accelerate declines towards 1.5800 further down. Ultimately, only a break back above 1.6300 would negate and give reason for reconsideration.

USD/CHF: Our core constructive outlook remains well intact with the latest setbacks very well supported by psychological barriers at 0.9000. It now appears as though the market could be looking to carve a fresh higher low, and the latest daily close above 0.9335 should accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9200 delays and gives reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

• Greek lawmakers fail to form coalition government
• China announces additional cut to RRR
• Monday’s economic calendar is light; broader themes in play
• Aussie below parity but supported on solid data and RBA comments

Failure for Greek lawmakers to form a coalition over the weekend leaves the markets in a risk off trade, and the Euro is looking to make fresh declines down towards next key support by 1.2800. Perhaps also potentially weighing on sentiment was the other weekend news, after China came out and announced yet another 50bp cut to the reserve requirement ratio. While we understand that there is reason to react positively to the news on the move for additional accommodation to help stimulate the economy, we also feel that the move underscores the severity of the slowdown in China and the potential impact it will have on correlated economies going forward.

Overall, the economic calendar for Monday is rather light and we suspect that markets will continue to trade off of broader themes. Elsewhere, Aussie has finally broken back below parity, while Kiwi has extended declines on the back of weaker retail sales data. Aussie setbacks have been somewhat supported however by solid local housing finance data and upbeat comments from RBA Lowe.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market has finally cleared some key support by 1.3000 and the break opens the door for deeper setbacks over the coming days towards the 2012 lows from January at 1.2620. However, short-term technical studies will need to unwind from oversold readings before we are to see any extended declines below 1.3000, and we recommend looking to sell into rallies into the 1.3150-1.3200 where a fresh lower top is now sought. Look for a potential bounce by the 78.6% fib retrace off of the yearly low-high move which comes in by 1.2800. Ultimately, only back above 1.3300 would delay.

USD/JPY: The latest pullback from the 2012, 84.20 highs is viewed as corrective and it looks as though the market could still see a bit more weakness before considering the possibility for the formation of a medium-term higher low. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.

GBP/USD: Finally starting to see signs of a medium-term top and potential 2012 high after the market has stalled and retreated from the 1.6300 area. Key support now comes in by 1.6050 and a break and close below this level will confirm bearish bias and accelerate declines towards 1.5800 further down. Ultimately, only a break back above 1.6300 would negate and give reason for reconsideration.

USD/CHF: Our core constructive outlook remains well intact with the latest setbacks very well supported by psychological barriers at 0.9000. It now appears as though the market could be looking to carve a fresh higher low, and we will be watching for additional upside back above the recent range highs at 0.9335 over the coming sessions. A daily close above 0.9335 should then accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

• JP Morgan losses seriously diminish credibility in banking sector
• Political saga in Eurozone continues to shake investor confidence
• China economic data disappoints and weighs further on risk correlated assets
• Commodity bloc and emerging market FX exposed

The intense risk-off price action that we saw over the past several sessions looked like it might be poised for reprieve into North America on Thursday, before markets got wind of the disturbing JP Morgan news late in the day. The largest US bank announced a $2B trading loss resulting from some hedges gone bad. While the losses hardly mark a dent in the balance sheet of the banking giant, the news could create a more significant risk off reaction given how JP Morgan has made its stellar reputation throughout the crisis; one of being so far away from reckless trading errors resulting in losses of billions of dollars. Now that JP Morgan has come out with such a loss, it opens the door for similar losses from other major financial institutions and severely diminishes the credibility in the baking sector once again. Many investors are wondering if other banks shouldn’t now mark their trades to market so a clearer picture can be afforded on where things lie.

In our view, the global economy is still standing on shaky ground, and we are not at all surprised to see these developments. We have been arguing for some time that equity markets have been too well bid this year, and we continue to project additional weakness over the coming weeks. The JP Morgan news is certainly a welcome headline for the Eurozone, with the story taking some of the attention away from the political turmoil in Greece and the impact it is having on the broader economy. While the local government is trying to piece together a solution that will keep the existing framework and game plan intact, there is clearly a new regime opposed to the idea of austerity and a regime that will be resistant to the changes that were already in motion pre-election. The prospect of a Greece exit can not be ruled out, and more importantly, investors are concerned of the impact this might have on other countries like Italy and Spain. All in all, the North American continent has been shaken with bad news, Europe is still struggling with its own troubles, and things are now no better in the east.

The latest round of economic data out of China is quite discouraging in our opinion, and continues to highlight the ongoing slowdown that is materializing in this major economy that many had thought was immune to the global crisis. The softer than expected industrial production and retail sales prints only help to reaffirm our view that the Chinese cool down is reflective of the third phase of the global recession. The third phase which has officially kicked into gear should expose some of the highly correlated markets like the commodity bloc economies and emerging markets. As such, we continue to project underperformance in currencies like the Australian Dollar, New Zealand Dollar and Canadian Dollar going forward, against the lower yielding major currencies. Emerging market FX looks to be even more exposed, and currencies like the South African Rand, Mexican Peso and Turkish Lira could be at risk for major declines into the second half of 2012.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market has finally cleared some key support by 1.3000 and the break opens the door for deeper setbacks over the coming days towards the 2012 lows from January at 1.2620. However, short-term technical studies will need to unwind from oversold readings before we are to see any extended declines below 1.3000, and we recommend looking to sell into rallies into the 1.3150-1.3200 where a fresh lower top is now sought. Ultimately, only back above 1.3300 would delay.

USD/JPY: The latest pullback from the 2012, 84.20 highs is viewed as corrective and it looks as though the market could still see a bit more weakness before considering the possibility for the formation of a medium-term higher low. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.

GBP/USD: Finally starting to see signs of a medium-term top and potential 2012 high after the market has stalled and retreated from the 1.6300 area. Key support now comes in by 1.6065 and a break and close below this level will confirm bearish bias and accelerate declines towards 1.5800 further down. Ultimately, only a break back above 1.6300 would negate and give reason for reconsideration.

USD/CHF: Our core constructive outlook remains well intact with the latest setbacks very well supported by psychological barriers at 0.9000. It now appears as though the market could be looking to carve a fresh higher low, and we will be watching for additional upside back towards the recent range highs at 0.9335 over the coming sessions. Above 0.9335 should then accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

- Short-term technicals starting to look stretched; Euro bounce possible

- Strategy is to sell currencies (expect Yen) against the buck into rallies

- Aussie outperforms on solid employment data

- China trade data disappoints and weighs on broader sentiment

- Greek political saga continues; austerity in jeopardy

- Bank of England policy decision due up later

Although the US Dollar remains very well bid across the board (Yen exception) on risk liquidation themes, technical studies are starting to look a little stretched and could warn for some consolidation before any fresh currency weakness. We have mostly been seeing some corrective consolidation in early Thursday trade thus far, and from here, we prefer an approach of selling currencies into rallies.

The Australian Dollar is the outperformer on the day, with the commodity currency finding some relative strength on the back of a very well received employment report. Nevertheless, we would warn that Aussie bulls should not get too excited by this data showing, as broader risk off macro themes are at play, and should continue to weigh on the Australian Dollar. By extension, the latest China trade data was far from positive, and we believe it should have more of an influence on the correlated Australian Dollar than the Aussie employment data. The China data therefore is offsetting, and as such, Aussie rallies are still only viewed as short-term technical rallies ahead of an eventual bearish resumption below parity.

Elsewhere, the ongoing saga in the Eurozone is still very much in the spotlight, and it now looks as though any efforts for austerity in Greece could be out the window, given the post-elections government shakeup. The latest comment from SYRIZA leader Alexis Tsipras, that the Greek bailout agreement was “null and void”, can not be sitting well with investors. Looking ahead, the key event risk for the day comes in the form of the Bank of England policy decision, although no change to rates or asset purchases are expected.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market has finally cleared some key support by 1.3000 and the break opens the door for deeper setbacks over the coming days towards the 2012 lows from January at 1.2620. However, short-term technical studies will need to unwind from oversold readings before we are to see any extended declines below 1.3000, and we recommend looking to sell into rallies into the 1.3150-1.3200 where a fresh lower top is now sought. Ultimately, only back above 1.3300 would delay.

USD/JPY: The latest pullback from the 2012, 84.20 highs is viewed as corrective and it looks as though the market could still see a bit more weakness before considering the possibility for the formation of a medium-term higher low. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.

GBP/USD: Finally starting to see signs of a medium-term top and potential 2012 high after the market has stalled and retreated from the 1.6300 area. Key support now comes in by 1.6065 and a break and close below this level will confirm bearish bias and accelerate declines towards 1.5800 further down. Ultimately, only a break back above 1.6300 would negate and give reason for reconsideration.

USD/CHF: Our core constructive outlook remains well intact with the latest setbacks very well supported by psychological barriers at 0.9000. It now appears as though the market could be looking to carve a fresh higher low, and we will be watching for additional upside back towards the recent range highs at 0.9335 over the coming sessions. Above 0.9335 should then accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

• Greece political uncertainty fuels fears of contagion
• Euro under pressure but yet to close below 1.3000
• Commodity bloc and emerging market FX most exposed

The ongoing political turmoil in Europe continues to shake the markets, with the inability for Greece to form a government now fueling speculation that the country might soon exit the Eurozone. Although an exit by Greece would have only a minimal impact on the broader economy, given the country’s size, fears of contagion seem to be the bigger problem right now, as investors start to price in the impact this will have on larger economies like Spain and Italy.

Technically, we have said that a close below 1.3000 would be a very bearish development for the Euro, as we have not seen a daily close below 1.3000 since January. With this in mind, Euro bulls can still hold onto some hope at this point, as the market has yet to officially put in a daily close below 1.3000. As such, we continue to recommend proceeding with caution at current levels, and only recommend looking to get more aggressively bearish the Euro on a daily close below 1.3000. A daily close below 1.3000 should then open the door for acceleration back towards the 2012 lows from January at 1.2625.

Despite the fact that all of the problems right now are Euro-centric, the Euro is still not the weakest currency in the current market environment, as the higher yielding risk correlated markets get hit even harder. We have been seeing some underperformance namely on the commodity bloc and emerging market FX, and should investors continue to look to flee to safety, we project that these markets will continue to underperform. As such, look for more weakness from currencies like Aussie, Kiwi and Cad, and from the more exotic markets like the Mexican Peso, South African Rand and Turkish Lira.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market has finally cleared some key support by 1.3000 and the break opens the door for deeper setbacks over the coming days towards the 2012 lows from January at 1.2620. However, short-term technical studies will need to unwind from oversold readings before we are to see any extended declines below 1.3000, and we recommend looking to sell into rallies into the 1.3150-1.3200 where a fresh lower top is now sought. Additionally, we recommend waiting for a daily close below 1.3000 before getting aggressively bearish. Ultimately, only back above 1.3300 would delay.

USD/JPY: The latest pullback from the 2012, 84.20 highs is viewed as corrective and it looks as though the market could still see a bit more weakness before considering the possibility for the formation of a medium-term higher low. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.

GBP/USD: Finally starting to see signs of a medium-term top and potential 2012 high after the market has stalled and retreated from the 1.6300 area. Key support now comes in by 1.6075 and a break and close below this level will confirm bearish bias and accelerate declines towards 1.5800 further down. Ultimately, only a break back above 1.6300 would negate and give reason for reconsideration.

USD/CHF: Our core constructive outlook remains well intact with the latest setbacks very well supported by psychological barriers at 0.9000. It now looks as though the market could be looking to carve a fresh higher low, and we will be looking for additional upside back towards the recent range highs at 0.9335 over the coming sessions. Above 0.9335 should then accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com