The US dollar has started February in the same vein that it finished January, buoyed by evidence of US economic recovery, after Friday’s GDP numbers, and fears that China will implement measures to control its economic growth.

The dollar has also remained supported over sovereign debt concerns in, not only Greece, but also Spain and Portugal as the dollar index traded at its highest levels since July last year. These fears are being compounded by widening spreads differentials between 10 year German ,and Greek and Portuguese bonds.

EURUSD – the Euro has continued its decline in Asia, as it heads towards the 1.3800 50% retracement of the 1.2460 to 1.5145 up move. The support between 1.3750 and 1.3800, which is the equivalent to the lows in June last year, is key to preventing further Euro losses.
This needs to hold for some sort of bounce to occur back towards the 1.4100 area. A break and close below these supports could well see the risk of further losses towards 1.3480. With momentum starting to look a little stretched the potential for some sort of bounce is there, while above 1.3800.

GBPUSD – the pound continues to suffer from a resurgent dollar, pushing below 1.6000 in Asia and heading towards trend line support at 1.5885, from the October lows of 1.5710. The pound should find some resistance at the 1.6010 area and behind that at 1.6120.

EURGBP – the Euro has managed to find a degree of support in the low 0.8600’s as the market heads into the end of the month. Continued Euro weakness is still expected to win out with the mid August lows at 0.8530 remaining the key objective, while below 0.8700/10. A move back above here would then look to re-rake the 0.8750 level followed by 0.8800.

USDJPY – the positive US GDP figures prompted a wave of US dollar short covering against the yen from Thursday’s lows at 89.15. A break above 91.20, or a EURJPY break above 127.00 would be yen negative, and could drive the yen lower against both the Euro and the dollar in the medium term. While below 91.20 the dollar can drift back towards trend line support at 89.45, from the November lows at 84.80