Forex Market Review – Euro falls as enthusiasm fades on Greek debt talks; yen gains

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Euro failed to hold onto gains and fell against the dollar and the yen. Despite a brief boost for  EURUSD 1.3190 after reports that China is considering greater involvement in EU rescue funds, the pair was unable to break stiff resistance levels at 1.32 which prompted selling down to 1.3084. This was accelerated by the worse than expected Challenger report on US job cuts which dampened sentiment. Also fatigue from the ongoing Greek debt talks are weighing on the euro.


EURUSD was supported from a further drop towards the end of the European session after economic data showed US jobless claims fell more than expected last week and US productivity rose 0.7 percent in the fourth quarter.


Sterling consolidated gains against the dollar, supported by PMI data on manufacturing and construction, which show that the UK is heading for growth. GBPUSD hit a two-and-a-half month high versus the dollar yesterday at 1.5881. Cable traded close to that high and was mostly trading sideways during the session.


The Swiss Franc gained against the euro after data showed Swiss December trade surplus narrowed to 2.01 billion francs. EURCHF fell from 1.2066 to 1.2050 but talks of an intervention by the Swiss National Bank may keep the euro supported above the 1.20 franc floor imposed on September 6 last year.


Yen remained strong, gaining against the euro and keeping the dollar at a three-month low. EURJPY fell to 99.61 while USDJPY remains range-bound near the post-October 31 low of 76.01. The Bank of Japan intervened in the currency market in October 2011 in an attempt to cap yen strength and has been threatening to do so again.