FX Trading Subdued

FX Trading Subdued



Risk appetite was mildly lower in the Asian session as the aggregate effects of a down beat Bernanke, weaker than expected Singapore data and rising tensions in the Middle East all took their toll. EURUSD started the session bid trade up to 1.2788 but sellers' stepped in and pushed the pair down to 1.2765 in light volume. USDJPY consolidated earlier gains trading up to 81.49 (Fibo lvl) but was rejected. Instead things were left to drift between 80.89 and 81.45. AUDUSD had an unspectacular session trading a very tight 1.0325-45 range but has started the European session feeling selling pressure. Overnight, Fed Chair Bernanke sounded subdued in regards to the drag caused by the US housing market. He stated that the lack of rebound in housing presented 'powerful headwind to recovery.'

This is not good news considering the recent US economic data which has also come out on the softer side. This did not provide any other solid guidance on economic data expectations or future policy. On the Fed front, Philly Fed Plosser stated that the extraordinary policy actions posed significant long-term risk to inflation. However, the real focus in the US is the fast approaching 'fiscal cliff'.

There are now worrying reports that the two-sides remain divided especial on the issue of additional taxes on the wealthy. China's Vice Finance Minister gave the market a clear reminder of the possible global consequences of going over the 'cliff', stating the event could subtract 1.2% from Chinese GDP in 2013. Given today's light economic calendar, US industrial production should the highlight of the day.