EUR/USD

From Danske Bank: The bank reports that there was strong risk-aversion in the FX market on Friday due to rising conflict in Egypt. Although there is a lot on the economic calendar this week, including the ECB meeting, non-farm payrolls and ISM, they believe the markets will continue to closely watch the situation in Egypt. “Hence, the move lower in EUR/USD could very well continue the next couple of days. Last week, according to the IMM data published Friday, was a second week of extraordinarily large building of speculative long EUR/USD positions. It indicates that EUR/USD due to its positioning is sensitive to ‘risk-off’ news,” they noted.

From TD Securities: Strategists at TD report that following a sharp fall on Friday, the EUR appears to have stabilized in the early hours of the North American session. They note that higher than expected preliminary Eurozone CPI for January continues to add to concerns about ECB policy, but believe the risks of tightening by the central bank are premature. They also note however, that President Trichet could still be hawkish in his rhetoric at Thursday’s policy meeting. “Technically, the EUR’s turn lower from the mid 1.37 area looks to be an important reversal and we would expect firm resistance around this resistance point now. Above 1.3750 would open up the topside further for a push towards 1.40. Short-term support is 1.3550/60,” they noted.

From KBC: KBC reports that here were a lot of rumours and speculation over the weekend on plans for the EU to tackle debt problems in Greece and Ireland. “In theory, any stable/ sustainable solution on this issue should be euro supportive. However, for now the impact is limited,” they noted. Also commenting on the escalating situation in Egypt, they note it is difficult to know how long this will impact markets but nevertheless “one can expect some more risk adverse investor behaviour at the start of the week and this will probably be limited to the upside of the single currency short-term.”

USD/JPY

From Danske Bank: The bank reports that the “flight-to-safety flows” are sending USD and JPY higher and as concerns about the situation in Egypt continue, this will be a key driver in currency trading. They also note that on Friday “we also saw strong support for the yen as global rates fell. The latter is much more important for the yen than the somewhat surprising S&P downgrade.” S&P downgraded Japan to AAA- status last week.

From KBC: A research brief from KBC comments that Japanese industrial production data for December was quite good but the focus for JPY trading was the uncertainty in Egypt, as it weighs on riskier assets. “USD/JPY tested the 81.85 support area overnight, but no clear break occurred yet. One might expect Japanese authorities to step up verbal warnings if the rebound of the yen would reaccelerate. Nevertheless, the day-to-day moment remains yen constructive,” they said.

GBP/USD

From KBC: KBC reports that with no important releases on the U.K. economic calendar, “global factors and technical considerations will be the main drivers for EUR/GBP trading.” They also report that EUR/GBP is “unwinding” overbought conditions.

From BNP Paribas SA: Ian Stannard, a senior currency strategist at BNP Paribas SA said the pound will “continue to be vulnerable to growth shocks. Rate hikes in the U.K. have already been priced in and the market realizes it will be difficult for the recovery in the pound to continue given the weakness of the economy.”

AUD/USD

From Commonwealth Securities: Commenting on the RBA rate decision later in the Asia/Pacific session and the latest round of economic data out of Australia, Craig James, chief economist at Commonwealth Securities said: "All the data released today points to a soft economy that does not need any further interest rate hikes in the near term.”

From St. George Bank: Commenting on the situation in Egypt and the effect on AUD, Besa Deda, chief economist at St. George Bank said: “We’ve seen risk aversion and oil prices jump and that’s creating nerves about the global-growth outlook and how far the Middle East tensions might spread. The Aussie may come under some downward pressure.”

USD/CAD

From TD Securities: TD reports in a research brief that CAD is a mid G10 performer so far in the North American session and is falling slightly against the European currencies, but is somewhat higher against USD, JPY and other commodity currencies. “Commodity prices have slipped a little over the weekend and, with WTI holding below $90, USD/CAD looks poised to sustain its recent range trade for a little longer,” they noted. They think support today will be found around 0.9960/70 but resistance “remains pretty firm” in the 1.0030/35 range.

From CIBC World Markets: Looking at the longer term perspective, Avery Shenfeld, chief economist at CIBC World Markets said: “As soon as we hit enough weakness in the Canadian dollar, the Bank of Canada will be itching to start hiking interest rates. They don’t want to move so quickly that the currency makes the export sector a loser.”