Historically there are not many major flows around holiday periods so any FX market movements are likely to be driven by position squaring. My understanding of how the trading market is weighted is as follows:
- Sterling; Short term EUR/GBP market is short, increasing the possibility of a short-covering rally. Long term EUR/GBP market is quiet long. Rallies should be capped and the next big move is expected to be down.
- JPY; USD/JPY speculative market is long, increasing the chances of a sell-off.
- EUR; Markets seem fairly square.
- AUD; most reports indicate that the market is long. A break below .7000 might see many exiting.
- CHF; Market is quite short CHF, especially against the EUR and many momentum funds have ben buying into GBP/CHF over the last few days.