Short Note on the Price Action

The yen is being sold in early North American activity.  The rise in 10-year US yields back above 2.0% and the rally in stocks are the major weights.  In our weekly technical note, we cited the trend line drawn off the December 8 high near JPY121.85 and hitting the early Jan high and last week's post jobs data high.  That trend line came in today near JPY119.25.  In addition, the JPY119.45 area corresponds to a 61.8% retracement of the dollar's decline since December 8.  Above here, resistance is seen near JPY120 and JPY120.75.    While we argue that dollar's uptrend has resumed, today's move is likely complete or nearly so at JP119.60.  

The euro remains within yesterday's range, whipsawed by headlines suggesting some movement in Greece's position, and more importantly at this juncture, movement from the EU.   The new Greek government has gradually scaled back some of its demands over the past few days, but the EU has not, until today.    Key support is still pegged at $1.1265.  On the upside, the $1.1350-60 still marks the proximate cap.  The nature of the brinkmanship is that a deal cannot be reached until the last minute.  There is the Eurogroup emergency meeting today and a heads of state meeting at the end of the week, followed by another Eurogroup meeting next Monday.  

Sterling briefly traded below yesterday's lows, but has spent the session mostly inside yesterday's range.   The market remains hesitant to extend positions ahead of the BOE's inflation report Thursday.  In it, the BOE may recognize near-term downside risks to inflation, but it will likely argue to look past the decline in energy prices.  Carney was recently quoted noting that wages are beginning to rise.  Look for the near-term price action to be confined to $1.5250-70 on the upside and $1.5180-90 on the downside. 

The dollar-bloc currencies are particularly heavy, with the prospects of more stimulative measures from China after its soft inflation report having little lasting impact.  The Aussie is likely to find support near $0.7750-60.  Moves above $0.7800 still look to be sold.  Against the Canadian dollar, the US dollar is a spring coiling.  It has been trading within the range set on February 3 (CAD1.2352-CAD1.2644).  We anticipate the break to come to the upside, when it comes.