After the consolidation comes the continuation of the trend, as is invariably the way, and we’ve now seen the Euro make further gains with the Yen under pressure once more. USDJPY has kicked on again and so far been up to 92.30 dragging with it EURJPY to 125.98, making light of barrier option resistance along the way. The Japanese authorities plan to drive their currency lower is certainly having an impact but we’ll see just how long it is before other countries start kicking off in protest. The so called “currency war� is just the inevitable consequence of the world trying to devalue all of their currencies during times of recession in order to make goods and services more competitive abroad, and has been well documented in this blog over the years. It does, of course though, only work fully if you’re a net exporter, otherwise the price of your imports fly higher too. Which is why it can only have a damage limitation impact in the good ol’ UK. Gawd knows how high our trade deficit would be if the Pound wasn’t languishing right now. Anyhow, the insatiable appetite for Euros continues right now despite Draghi’s links to the Monte de Paschi banking crisis, and Spanish PM Rajoy accused of illegal income from a slush fund. EURUSD has breached the 1.3600 resistance and as I type looks to be heading through the next one at 1.3650. EURGBP is having another go at 0.8600 (1.1628) and must surely overcome that particular hurdle shortly. While EURAUD is feeding off a vulnerability in the Aussie $ with many analysts looking for a reversal in the AUD bull trend by the end of this year at the very latest. In all of this the Pound is still looking over the Channel in awe and GBPUSD is struggling to keep pace. Yesterday saw a volatile day governed by month-end flows with a sharp move down to 1.5775 in the morning then an equally sharp retracement back to 1.5840. There currently seems little desire to head much higher than 1.5875 with sellers lined up between 1.5885-95, where there is strong technical resistance. If it breaks up due to the relenting march of EURUSD then expect a quick bail-out of shorts before finding more sellers at 1.5920-30. UK Manufacturing PMI at 09.30 may have a part to play in that but the big data today comes at 13.30 GMT with the US Non Farm Payrolls number.

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