After posting its highest levels for 3 months at 77.94 the dollar index has slipped back in Asia trading on profit-taking, and news that a report due to be published today will forecast that business confidence in Germany rose to the highest level since July 2008.

The yen also strengthened on speculation that Japanese exporters are repatriating profits before the year-end. The Bank of Japan held its benchmark rate at 0.1 percent, as forecast by economists.

The pound also suffered on the markets yesterday after retail sales for November came in lower than expected, posting a decline of 0.3% against an expectation of a rise of 0.5%. This morning’s UK PSNBR and money supply figures are the only figures of any note out today and how the markets react to these will determine whether the pound has further to fall.

EURUSD – has managed to regain some ground overnight checking the falls of the last few days, after failing to break below yesterday’s lows of 1.4305 in Europe yesterday. Downside pressure remains the focus, targeting 1.4120, but we could see the Euro rally back to 1.4505/10, the previous break-out level on any short squeeze.

GBPUSD – the pound has slipped below the 1.6200 level on the back of yesterday’s poor retail sales data and looks all set to test the key 1.6000 level over the next few days. A low yesterday of 1.6080 has been the extent of the down move so far. With money supply and PSNBR figures for November out at 9:30am this morning we could see some quite choppy trading. Any rallies should find resistance around 1.6220, which was the Asia high and 1.6300.

EURGBP – downside pressure remains the focus for now, while below 0.8920 but we have yet to close below 0.8875, so the downside is by no means a certainty here either. It would need a break of 0.8805/10 to propel the momentum downward. A recovery above yesterday’s highs at 0.8920 is needed to stabilise and diminish the downside pressure.

USDJPY – continues to benefit from recent US dollar strength but is continuing to struggle below the cloud resistance between 90.30 and 90.75. A break and close above 90.75 could well propel the dollar towards the 92.70 area. Despite spiking down to 89.00 and breaking the trend line support at 89.40 in early Tokyo the market closed above it so the current momentum remains intact for now, but only just.