• 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

• Risk rallies viewed as technical corrections; look to sell
• Euro consolidating above 1.3000 ahead of next drop
• Investors digesting implications of latest French and Greek elections
• Spain back in focus as the country attempts to rescue local bank

Although we have seen a bit of a bounce in risk correlated assets, we contend that the rally is nothing more than some minor consolidation ahead of the next wave of risk liquidation. The Euro managed to close back above 1.3000 on Monday, but from here, we expect any additional rallies to be very well capped ahead of 1.3200 in favor of an eventual retest of the 2012 lows from January at 1.2620. Market participants are still digesting the weekend election results out of France and Greece, and there is a good deal of concern as to whether the newly elected governments will adhere to the austerity measures imposed to ease the debt crisis. In Greece, the situation is highly uncertain, with the lack of a clear majority potentially creating a situation where austerity measures might be significantly reduced in order to appease the opposition. Elsewhere, Spain is back in the headlines, as the country attempts to rescue its third largest bank. Moving on, economic data continues to show signs of weakness, and the softer results once again highlight the fragile state of affairs in which the global economy lies. Overall, we expect risk correlated currencies and global equities to be very well offered on any rallies in favor of more bearish price action.

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 1.6075 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

- Market optimism fades and suggests more USD strength

- Widespread calls for a break lower in Eur/Usd

- Key economic data and political risk ahead

- Focus for now on monthly US employment data

Although we have seen no clear breakouts in most of the major currencies, and although the Euro still remains locked in a very well defined 1.3000-1.3500 consolidation (that has defined trade for much of 2012), there is a growing sense that the markets are very close to a major pickup in volatility. For now, the breakout looks like it will be in the US Dollar’s favor, given the sharp downturn in risk sentiment this week, on the back of some very disappointing economic data across the globe. In fact, we can’t remember a time when so many were all at the same time, calling for a major US Dollar rally.

It is with this in mind that we also find it somewhat surprising to see the Euro still so well supported. While it is true that the ECB were slightly hawkish on Thursday, we doubt that this alone will keep the Euro propped above 1.3000. Yet the market remains supported for now, despite the overwhelming bearish sentiment out there. Other currencies like the Australian and New Zealand Dollars have not been as fortunate, yet these markets are also holding up rather well when you consider a 50bp rate cut from the RBA this week and some disastrous employment numbers out of New Zealand.

There is a good deal of economic data and event risk over the coming days, and the results from these calendar events could very well influence the direction in the markets. Kicking things off is the monthly US jobs report, and many are now expecting a disappointment here following the softer ADP report earlier in the week. From there, the attention will turn to the political front, when all will be watching the highly anticipated election results out of France and Spain. The big issue will be if the election results compromise the current plan which involves the implementation of IMF austerity measures.

As far as currency strategy is concerned, we would recommend remaining on the sidelines until a clearer directional bias presents. The fact that everyone is calling for a major USD rally is certainly compelling, but not enough for us to test the waters.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: Overall, the market remains locked in a very tight directionless, choppy consolidation. Ultimately a break back above 1.3500 or below 1.3000 will be required for clearer directional bias. At this point, the market has stalled by some key resistance just ahead of 1.3300 to once again put the pressure on the downside towards the multi-day range lows down by 1.3000. Only back above 1.3500 would negate outlook.

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: Although the market had been very well bid in recent sessions, the rally looks like it might finally be closer to stalling out in favor of a bearish resumption. Look for a daily close back below 1.6150 to officially confirm, but aggressive traders may want to consider fading any strength beyond 1.6300 with daily studies starting to roll from overbought. Ultimately, only a daily close above 1.6400 would delay outlook.

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

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