A relatively light day in terms of calendar releases helped to spur on the appetite of risk as the US Dollar lost more ground yesterday following the Fed’s announcement that interest rates would remain low until late 2014.

EURUSD edged up to test resistance below 1.3200 briefly, before coming back down towards 1.3100 as once again discussions in regard to Greece ‘continued’ and made ‘some progress’ but with no resolution determined, this is likely to weigh on the currency further as market participants get ever edgier that a resolution may not be on the cards.

Whilst talks of QE have increased the appetite for risk and seen the Dollar been sold off against riskier assets, I’m not confident that this correlation will continue in such a linear fashion moving forward – a 70% haircut in Greek debt will be a bitter pill to swallow for investors but the ECB are likely to shun this notion so the fallout may be a lot worse than expected so if US data continues positive, flows may very well fall back to the Dollar as the situation in Europe deepens. Time will tell!

Focus today will once again turn to the bond markets as Italy sells a total of 11bn Euros of 6 and 12 month paper. The UK will also look to sell 500m Pounds of 1 month bills, 1.5bn Pounds of 3 month bills and another 1.5bn Pounds of 6 month bills. The main release will come in the form of US GDP so market movements are likely to be fairly reserved prior to the release at 1.30pm.

Chart of the day: EURUSD Daily

As discussed yesterday, momentum helped push EURUSD higher to within a fraction of resistance before fresh offers emerged and pulled the pair lower and back in to its recent range. An inside day is likely today, particularly off the back off a release from Spain showing that employment currently stands at a staggering 15 year high of 22.9%. Resistance also comes in at the base of the Ichimoku cloud – with the lagging price line still in negative territory, this further compounds my view that a resumption in the overall downtrend is the most favoured direction

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