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Asian FX market wrap: wild moves in EUR/USD again

  • EUR/USD dropped 50 pips in a minute as stops triggered below 1.3950
  • PBOC see USD funding trade as a major threat
  • President Obama gives State of Union address focusing on jobs, health and spending freeze
  • Japanese December retail sales -0.3% YoY, weaker than expected
  • Stockmarkets higher across the region by over 1% on average
  • Gold and Oil both up 0.25%

The main story of the session has been the liquidity situation (or lack of one) in the EUR/USD. The pair sat comfortably around 1.4015/20 for the morning session but there were two quick attempts to take it below the figure as Tokyo opened. The third attempt was wildly successful for somebody; the price action 80 given, 70 given, 45 given, 30 given, 65 bid- all in the space of 1 minute. There will certainly be some questions asked especially as the interbank market traded only 5 times below 1.3960. Very strange. The market has subsequently recovered slowly to the 1.4015 breakdown level. Range: 1.3930/1.4039.

Heavy stops in the USD/Asia pairings were also blamed for the extreme volatility in the EUR/USD.

USD/JPY has been quite subdued in a 89.88/90.39 range with both AUD/JPY and GBP/JPY making decent gains on the session. More disappointing economic data in the form of retail sales certainly did not help. Heavy offers still expected at 90.55/60 with big stops still above 90.70.

EUR/GBP fell below technical support at .8650 when the EUR/USD 'stupidity' was underway. The GBP rallied strongly then across the board, reaching a high of 1.6228 on the cable. Offers are said to be reasonably heavy around 1.6240/50 with stops above 1.6280. Real money bids are still waiting patiently towards 1.6000.

The AUD/USD refused to fall in line with the EUR this morning and the prospect of a Tuesday rate rise is encouraging traders to cover their short positions. Range: .8931/.9026.

Markets: Nikkei +1.6%, HK + 1.7%, Kospi +1.3%, Shanghai +0.4%. Gold +0.25% $1088/oz. Oil +0.25% $73.90/bbl.