Littlefish FX | Jan 09, 2013 05:57PM ET
Another relatively quiet day with markets focusing attention on Thursday's ECB meeting.
Key Times: (all GMT)
Although the forecasts for the ECB meeting are unchanged, several analysts have been calling for a rate cut.
The key to much of the action and potentially the outcome of January will however be focused on two key levels which we have slow ground to over the past few days.
If key levels hold then the chances are we will see a continuation of the broader Bull trend we have been seeing.
If key levels break then the chances are we are at a potential turning point in the market.
The key to many of these levels is likely to be contained with the markets views of comments from Super Mario himself.
If market believes Mario Draghi is positive chances are markets will push higher.
Last time out though Draghi was relatively negative on the overall outlook for Europe and with a continuation of poor data this may be the case for tomorrow as well.
What I would suggest though is that it is futile second guessing these things, let the market show you its hand then make the move.
EUR/USD
Key level for tomorrow is the 1.3000 support.
If this breaks chances are we move lower, if it holds then we could be looking at a much larger move higher.
Today the pair dipped slightly but held most of its ground as the markets look for news tomorrow.
Having been unable to really push this week, my strategy is now focused on two things.
Rejection of the 1.30 handle will put me long for a move towards the 1.34 mark.
Break of the 1.30 handle and I will look for short entries.
Overall I still remain Bullish this pair until the 1.30 level breaks though.
However it has managed to defend its key 1.60 level.
Like the Euro and its 1.30 handle the 1.60 handle in the Pound is likely to be key tomorrow.
If this holds then this downside movement may act as a retracement for a push higher.
If this level breaks (and we hold below) then we could possibly be looking for a much larger move lower.
Charts are telling a couple of different stories at the moment.
Daily looks to be suggesting a push to upper resistance.
That said, I don't see a good risk reward option at the moment; instead I will wait for a test and a signal looking short or potentially a break high.
USD/JPY
Dollar again had a relatively strong day today.
However, potentially we are starting to see some signs of a turning point in the pair.
For now I would take this with a pinch of salt but starting to see signs of divergence which could be pointing to a move lower.
I'd like to see a clear short entry signal or a break and hold below the 87.00 handle before positioning short however.
This now looks like a key level for the pair, a break below or hold above could set the short term tone.
On the 4hr chart this pair also broke the Swing Low.
HUF will need to gather some more momentum for this trade to pay off and general Dollar strength/weakness could be key, however I still like this pair for a move lower.
Price action since has done little apart from consolidate as the markets wait for tomorrows risk events.
Another rejection of lower prices today does hint at the strength of support and therefore a break of this level lower would allow us to consider shorts.
Hold above and I continue to look for long entries.
Either this turns out to be a fake break to the downside for a push higher or the pair will trace higher slightly before a move lower.
Still like this pairs for a test of the 0.8475 mark before potentially a break and a move higher.
However given the move since the initial signal it is possible to minimise risk heading into tomorrow by moving stops up.
Pair moved slightly lower off of this but consolidated with the wider markets ahead of tomorrow.
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