I’m told that stops in the EUR/JPY above 122.50 have been the trigger. The EUR/USD has popped up 20 pips to 1.3710 and there is talk of lots of trailing stops above 1.3720.

It has been an extremely quiet trading session in Asia today with the upcoming Chinese New Year having traders in holiday mode already.

• Trichet leaves Sydney 1 day early to attend ECB meeting
• UK house prices rise in January but activity drops off
• UK January retail sales worst in 15 years
• Suggestions rise that EU might ‘teach speculators a lesson“
• Professional market shows speculative short positions in EUR at record level suggesting hedge funds have increased their bets. Retail market looks to be evenly divided.
• Asian stockmarkets fairly flat despite late Wall Street fall
• Gold makes small gains

It is hard to put an interesting spin on what has been a very quiet session. The EUR was unsure what to do when reports emerged that JC Trichet had left Sydney 1 day early to attend an ECB meeting. Some saw it as a positive, the ECB was about to take some positive steps, others saw it as a negative, more panic meetings for the ECB. Movement was nevertheless confined to fairly tight ranges. The fact that regional stockmarkets have ignored the late fall on Wall Street and managed to finish fairly flat has helped the EUR amd EUR crosses to recover late in the session and finish on their highs. Ranges: EUR/USD 1.3644/94 and EUR/JPY 121.68/122.41.

The GBP was unaffected by conflicting economic data, strong house prices and weak retail sales figures. The market didn’t know what to do so it did nothing. Ranges: 1.5567/1.5618 in cable and .8757/71 in EUR/GBP.

AUD/USD fell to its session low of .8617 early in the day after the late fall on Wall Street but has since recovered as technical accounts continue to buy aead of the 200-day MA. Range: .8617/78.

USD/JPY range 89.17/50.

Markets: Nikkei -0.1%, HK +0.2%, Shanghai +0.2%, Kospi +0.5%. Gold +$2 at $1068/oz.

Well were still some 90 minutes away from the European open but the EUR/USD and the EUR crosses are on their session highs as some short covering seems to be the name of the game. Trailing stops are being reported above 1.3720 and starting again above 1.3760 in the EUR/USD and above 122.50 in EUR/JPY. Buying interest is reportedly heavy around 1.3580/95 in the EUR/USD but stops are also very heavy below 1.3550.

Looks like a wedge pattern forming on the hourly EUR/USD chart and this is generally a continuation pattern. In other words, more downside is favoured in the short term. Major technical support is at 1.3480 which is the 61.8% retracement of the 1.2450/1.5140 rally. There is further chart support behind there at 1.3410/20. This support band looks like it will be critical for medium term movements in the EUR/USD.

On the order front, talk of a decent sized barrier at 1.3550.

I’m always a little wary of reports such as this, but a friend of mine who works for a major European bank just rang after reading my rant on the EUR. He said that the latest report on speculative positioning in the professional market suggests that EUR short positioning is at record levels. Has anybody read or heard of any reports from the retail market which might reject or substantiate this?

12 months ago at the height of the global financial crisis, when worldwide stockmarkets were on their knees, EUR/JPY which is the main risk-aversion magnet in the FX market, was trading around 118. Somebody who follows the stockmarket closer than I will be able to say exactly, but I do know that the S&P has risen a lot since then (50% or even a bit more?). Ok, the S&P has now turned lower but does this justify having the EUR/JPY cross at 122? Somehow I don’t think so and this whole Greek episode feels to me like the market getting over excited or over aggressive on a story which just doesn’t justify it. In other words, I think the market is chasing something which isn’t there and once it starts trying to get off this trade there will be an almighty spike and EUR/JPY will be back close to 140 again. (But I have been wrong before).

Both the Nikkei and the Kospi have reclaimed some of the earlier losses as regional investors haven’t been overly spooked by the late fall on Wall Street. The Nikkei is now -0.5% and the Kospi is +0.2%. Gold is steady at $1065/oz. FX markets remain very quiet.

This is the latest Bloomberg report on the movements of JC. Maybe he’s got his own Papparazzi now? The FX market is showing no inclination to move with all of the majors trading in tight 20 pip ranges.

The latest RICS data shows that more real estate professionals reported a rise in house prices, 32% up from 30%, but activity in the housing market was off probably due to the very cold weather.

GBP has been mixed so far today, up a bit down a bit, but I suspect that the poor retail sales figures might have more impact once London opens. Maybe a long EUR/GBP trade might be a good short term play as the daily chart looks to be bottoming out.

Cable is a little higher despite some pretty poor retail sales figures which have just been released. They show that retail sales were 0.7% lower than a year earlier and they were the worst figures for January in 15 years.

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