Further Chop On Holiday Trade And Cliff Uncertainty

Following yesterdays spat between Boehner and Obama on the fiscal cliff, little further progress was made today.

Still very much within holiday trading mode and frankly the markets are extremely quiet.

Morning saw Fitch on the wires highlighting the obvious that the Eurozone crisis and fiscal cliff dominate the sovereign outlook.
BoE minutes noted that the MPC voted 8-1 in favour of keeping the asset purchase facility unchanged at £375bn - commentary supporting this also suggests we are unlikely to see more QE in the future unless things drastically deteriorate.

Fitch also suggested following the minutes that the UK rating was at threat if extended economic weakness causes any further slip in fiscal targets. Essentially if we miss another goal we get downgraded.

In all honesty I suspect we will see the UK downgraded in the first half of next year if not Q1.

So back to the US fiscal cliff.

Apparently Obama is due to go to Hawaii tomorrow but will postpone if a deal isn't done, which it isn't.

It now looks like a deal is much further away than it seemed on Tuesday, however we still suspect that a compromise and agreement between the two parties will arise before year end.

It is unlikely this compromise will result in a full resolution of all fiscal cliff issues, however, it may well buy further time before wider discussions and decisions can be hammered out.

EUR/USD
Chopped around today, with a retest of the 1.33 handle.
I still like this pair short from here, however the holiday trading period does raise some concerns.
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GBP/USD
Similar to the Euro the pound pushed higher but failed to test and hold the upper resistance.

Our strategy remains the same on this and I prefer a short retracement before any further push higher.

Again watch for holiday trading conditions
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AUD/USD
Having dropped lower yesterday the Aussie found some support today around a previous pivot high (resistance now turned support).

I still think there is some room for a push lower from here but again wait for the market to provide some clear signals before entering
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USD/JPY
Dollar managed to hold ground again the yen today on yet further yen weakness.

Still looks incredibly overdone however the continued yen weakness doesn't seem to be letting up anytime soon.

Interim I prefer the idea of playing breakouts to the downside on lower timeframes or looking for a final rejection of a move higher - we might be waiting until the new year for this though.

Longer term I think we are overdue a retracement (see previous commentary for reasons why)
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GBJPY And EUR/JPY
Still prefer these for a retracement but conflicting signals suggest we should wait for a clearer signal.
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USD/CHF
Double signal on the Dollar Swissy suggest we could see a push higher from here.
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EUR/GBP
Chop today in the Euro vs the Pound ass month end flows (happening early due to holidays) provided some support; however, I sitll like this pair for a reversal lower from here.
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USD/NOK
Small push lower today allowed a better price, I still like this pair for a push higher from here.
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