It's been more than 9 hours since EUR/USD bounced to current levels around 1.3240 from overnight lows at 1.32, now awaiting for more US 'fiscal cliff' news to come, as it remains the primary risk event in financial markets; it's all around. That, and Yen weakness. It's reminiscent of a time just few months ago when pronouncing the word 'Greece' shook the EUR/USD. Now, is the same is true with the 'fiscal cliff'.
Yesterday, during early NY session, EUR/USD traded off fresh weekly highs, dealing around the 1.3285s. US Senate Majority Leader, Harry Reid, was recently quoted as saying that going over the fiscal cliff "looks like where we're headed," and EUR/USD slipped all the way to 1.32 round in about 15 minutes time, the same as it happened past Thursday.
And so it seems selling pressure will continue on risk aversion, as long as we wait for the fiscal cliff results and President Obama's State of the Union Address next year. Meanwhile, everything seems lined up at critical levels to make or break. Oil is sitting right below fresh 9-week highs around $91 level; Gold printed a double low at $1635 past December 20/21, and now trades quiet around $1660, its 200 day SMA; Asia-Pacific local share markets keep printing fresh 2012 highs, despite the weak outlook for US equity indexes.
US domestic economic data released Thursday showed the housing sector keeps improving, though at a slower pace. But consumer confidence had a bigger hit, dropping to a 4-month low, down to 65.1 from previous 73.7, showing "the scale of the drop really intensifies the concerns about the potential economic implications from $600bn+ of tax rises and spending cuts due to hit in less than a week, unless politicians can strike a deal," noted James Knightley, an analyst at ING.
For the London morning session ahead, Italy will auction several long-term sovereign debt maturities, which, coupled with upcoming general elections and the uncertainty surrounding Italian PM Monti, could be the focus today in Europe. No other major news is expected to be released until US Pending Home Sales at 15:00 GMT.
Against the Japanese yen, EUR printed a fresh 16-month high at 114.70 in early Tokyo trade, coming all the way from record 11-year lows around 94.00 by late July, adding +14.6% gains year to date. "No sign yet of any slowdown in the EUR/JPY bull move and I suspect that Japanese investment funds have been buying this morning. The high so far has been above 114.70 and there are expected to be barriers in place ahead of 115.00," said FXWW founder Sean Lee.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.