This will there will be a lot of focus on the risk on/risk off theme, especially with the FOMC minutes in play.
We currently sit at strong support levels in equities and we will need to break these down for the risk off trade to stand any chance at pushing lower.
There are few data catalysts early week but news out of the eurozone meeting on Monday will be interesting along with further commentary on the UK vetoing any European budget talks. We also need to be wary of comments out of the Greece and the Troika report given the delays highlighted last week.
With regards to technicals, levels played up well last week and we expect a bounce early week with risk off momentum resumed mid week assuming no real news.
We carry the following into this week:
The euro broke our 1.2720 handle and pushed slightly lower, although trading was very choppy. Really looking for two potential options on the euro now, either a continued move lower to the 1.26 handle or a retrace to the 200 day moving average; however whilst below the 1.28 mark our bias remains to the downside.
GBP/USD
With the pound dropping like a stone in water on Friday we now sit in a really key area for this pair. The 200-day moving average also comes in at the 50% Fibonacci retracement from the July low to September high. If we break below this we could see a faster move lower, however this could also act as really strong support and whilst this holds our bias remains Neutral-Bullish.
AUD/USD
Quite a rough week for the aussie with quite a bit of chop in the markets; risk off sentiment driving this pair lower whilst commodities were trying to push it higher. Our overall bias is still Bearish but like many of the pairs we haven't seen a strong break of support and whilst support holds we remain neutral.
USD/JPY
Pair pushed lower then bounced quite hard against the yen; we like this pair long and a push lower to move higher could be on the cars. Nice entry on a slight retrace could offer good value.