There is no reason to expect anything other than a stronger USD in early London today with the risk aversion theme alive and well, not to mention significant levels being broken by a number of currency pairs in the last 24 hours. So expect to see new lows in the EUR, GBP, AUD, CAD and JPY against the USD for the day set early on. It is expected the fears of a banking meltdown in Europe will continue to weigh heavily on the equities markets as well today.
The AUD/USD may fare a little better tonight than the rest of the high yielders after comments from RBA Assistant Gov Edey were taken to mean there is a reduced liklihood of further large rate cuts on the way. The AUD/USD will continue to meet with resistance initially at 0.6430, then 0.6570, 0.6650 and 0.6850 to name but a few.
Keep in mind there are reportedly LARGE barrier options at 1.2500 so i would not be surprised to see something similar to yesterday where we test 1.2500 early on and then trade sideways for the remainder of the morning. EUR/JPY has held up well but it really is not worth playing unless we are a little closer to the 115/120 boundaries of the bigger picture range, no point getting caught up in a lot of noise! The EUR/CHF has struggled since breaking below 1.4800 and now looks like heading to 1.4600.
