Euro and Yen Range in Quiet Trade

For the second day in a row euro and yen traded in very tight ranges with little economic data to propel price action either way. The EZ Current Account deficit widened unexpectedly to -8.2 Billion from -7.0 Billion the month prior. This release has produced negative results in 11 out of last 12 months. The deteriorating balance sheet position of the Euro-zone is driven strictly by the widening gaps in the income and transfer components of the report with the region still running surpluses on its goods and services accounts. Overall, however the report's impact on FX trade was minimal as EUR/USD dipped to 1.2630 only to bounce back to 1.2645 shortly thereafter. In the past 24 hours the pair appears to have found support in the 1.2600 region as the market remains very much in doubt about any further rate hikes from the Fed and is therefore reluctant to aggressively buy dollars at these levels.

Today's US Consumer confidence data and existing housing sales report may go a long way towards making or breaking the case of the dollar bulls. Should the eco data show a significant deterioration in consumer sentiment and a marked decline in housing demand the pressure on the Fed to pause will increase tremendously and the EUR/USD may finally break to the upside to test the 1.2700 figure.

In Japan the key economic data will not be released until the back end of the week with Current Account, CPI and labor reports all due in the next few days. As a result USD/JPY also languished between 116.70-116.90 for most of the night as currency traders simply marked time ahead of the economic news. The market is looking for any sign that BOJ will begin to speed up its monetary tightening process with yen bulls needing to see some further increase in inflation and labor demand before USD/JPY picks up momentum to the downside.