The USD/JPY has moved below 112.00 and Japanese bids at that level on heavy selling in thin markets by US funds. The next level of good support is found around 111.80, which is the 38.2 fibo of the 107.25/114.65 move. The USD/JPY trades 111.93/98.

Cable has tested the 2.0000 resistance level after pushing its recovery envelope from an early week four-month low of 1.9753. However, GBP/USD is continuing to underperform EUR/USD with regards appreciation, as evidenced by the EUR/GBP rise to a new euro lifetime high of 0.7355.
Sterling lost its 2.00 handle nine days ago (Dec 19) following the BoE MPC minutes disclosure that this month”s 25bp UK base rate cut to 5.5% was delivered by a unanimous 9-0 vote. 2.1162 was last month”s 26-year high (Nov 9).
December”s Chicago PMI index will be disclosed at 14:45GMT, with November US new home sales ensuing at 15:00GMT. The PMI index is forecast at 51.7. New home sales are forecast at 717k.

The AUD/USD and AUD/JPY continue to move lower in Asia on the back of Japanese AUD/JPY selling flows. The cross has fallen below the base of the Ichimoku cloud around 99.00 while the AUD/USD has traded as low as 0.8721. Key support for the AUD/USD is found at 0.8705/15 with the 100-day MA (0.8705) yesterday”s low (0.8710) and the 20-day MA (0.8715) all found in that window.
Traders were a bit surprised this morning to find the AUD/JPY up around 100.00 despite the fact that geo-political risks were raised by the assassination of Bhutto and Wall Street fell nearly 200 points pushing the VIX index above the key 20 level. Normally the AUD/JPY suffers under that scenario and there appears to be a very delayed reaction. The AUD/USD trades 0.8728/33.

The option barriers at 114.50 have finally been cleared away in early US trade Thursday. Holiday thinned markets helping the break higher and then the tripping of stops propelling the pair up to 114.65 since. Japanese exporter offers are said to be heavy through 115.00, with the bulk of congestion at 114.80. More exotic barriers lie in wait at 115.00, which should prove another stumbling block if reached today

The USD/JPY has opened above the daily Ichimoku cloud at 113.55 for the first time since July after streaking higher on Friday due to heavy carry trade demand on rising risk appetite. The rise on Wall Street resulted in the VIX index falling below the key 20 level and closing at 18.47, which is the lowest level since October 12. The USD/JPY traded up to the 100-day MA around 114.17 and that reading comes in around 114.12 today.
There is a Tokyo holiday today, but traders suspect that Japanese exporters will leave plenty of sell orders ahead of the psychological 115.00 level to discourage aggressive attempts higher. Support today is found at the top of the cloud at 113.55 and only a break back below that level will relieve the upward pressure. The USD/JPY trades 114.09/14.

The EUR/JPY moved up to 164.09 in early Asia to trigger a few stops, but has eased back to 163.80 when there was no follow-through. The EUR/JPY made a strong move higher on Friday when the JPY was heavily sold due to carry trade demand resulting from rising risk appetite. The rally on Wall Street on Friday is expected to continue until year-end this should keep the JPY on the defensive. Support for the EUR/JPY is found at 163.50 where the tenkan line comes in today with the top of the Ichimoku cloud not far behind at 163.15. Resistance is found at the December 14 high at 164.65 with more daily highs stringing up to 165.30. The EUR/JPY trades 163.76/81.

The Nikkei rallied into the morning TSE close, ending the morning session up 173.56 points or 1.15% on the day at 15,205.16. The move up here was not lost on EUR/JPY players who have pushed the cross up above early, pre-Tokyo fix highs to the 162.40 level. It currently trades 162.37/42. Lows were seen earlier in the 161.90/95 area. The cross spiked down to 161.75 overnight. Whether the current move can be sustained is questionable with so many players already sidelined for the slew of holidays next week. With the Ichimoku kijun line at 162.35 having been cleared, if only barely, next technical resistance is eyed at 162.43, the overnight high, and then at 162.53, the 200-day moving average. It may be difficult to get above these levels despite their proximity, let alone the cloud top at 163.20

EUR/has backed from the 163.00 level, currently trading down at 162.84/89. A somewhat weaker USD/JPY may be to blame with whatever demand going into the Tokyo fix having abated and the pair edging lower. EUR/JPY sees some support around 162.70, a level on the hourlies. More is seen around 162.50, the 200-day moving average and 162.48 the low in New York overnight, 162.30-35, 162.35 the Ichimoku kijun line and 162.31 the low in London yesterday. Topside resistance looks to be building from the 162.15-20 area, the retracement high. EUR/JPY currently trades 162.80/85.

The 1m 25 delta risk reversal trading just above the recent 2.1 lows seen last week. The contract going through at 2.3 JPY calls earlier and sitting around this level since. Levels below 2.1 have not been seen since Mid October, with market finding good interest to buy on subsequent tests. The 3m 25 delta contract trading 2.7 JPY calls earlier.

The USD/JPY rally on Friday stopped short of breaking up to the base of the daily Ichimoku cloud at 113.70. The descending cloud base comes in at 113.00 today and the top of the cloud is found around 113.50. The USD/JPY appears set open in Asia around 113.35, which will but the pairing inside the cloud for the first time since November 5. A break above 113.50 puts the USD/JPY above the top of the cloud for the first time since October 15. The USD/JPY trades 113.34/39