Philip Salter
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THE last few weeks have been uncharacteristically quiet on the European crisis front – but pessimists may just view this as the calm before the next inevitable storm. The optimistic view could be that surely all of the bad news is getting close to being priced in for the euro and its death has been consistently overstated. IG Index quotes euro-dollar at $1.3049-$1.3050.

Traders were watching dollar-yen with interest after coming back from the Christmas break. The pair extended last week’s losses below ¥77.00 and headed towards the significant support around ¥76.50, the lows reached after the tsunami in March. Buy orders were being lined up from ¥76.50 to ¥76.0, anticipating an official response. If replicating this trade, a stop loss below ¥75.50 would be recommended. Spread Co quotes ¥76.729-¥76.749.

The end of the festive period should welcome back significant volume in all asset classes. With the absence of any tangible progress on Europe’s debt crisis and the US budget imbalance, the commodity currencies are likely to be in focus. On Australian dollar-dollar Alpari quotes $1.0348-$1.0350.

Sterling-euro has battled hard to win over the €1.2000 level without much success, despite the ongoing problems in the Eurozone. Even stronger than expected UK manufacturing data was not enough to attract traders back to the pound. With the major resistance barrier of €1.2000 remaining in place, it’s hard to see sterling pushing beyond there. Capital Spreads quotes €1.1960-€1.1963.

With manufacturing picking up in the US, China, and India, risk appetite is back on for forex traders. The Kiwi dollar jumped to a three week high against its US counterpart, as traders moved out of the safe haven US dollar. This trend could continue in the short term, as the Kiwi is well supported. Capital Spreads quotes New Zealand dollar-dollar at $0.7883-$0.7887.

The UK’s manufacturing activity survey indicated that the pace of contraction slowed last month, giving the currency a lift. Sterling-dollar has fallen back from above $1.56, with the downtrend line from the 14 November highs the main barrier to the $1.57 level. Longer-term resistance at $1.5770 may come into play, should sterling rebound past that point. CMC Markets quotes $1.55836-$1.55845.