The dollar and yen were weighed by positive risk appetite overnight, which carried into the European session. The standout performer was EUR, which saw broad based strength via USD, JPY, GBP and the commodity bloc currencies. The persistent improvement in eurozone sentiment continues to encourage long term back into the eurozone to detriment of other overseas assets. USD-JPY benefited on extended yen weakness, as well as a move up in U.S. Treasury yields, which saw the 10-year benchmark clear 2%. European developments were supportive. Refinancing costs fell at today's Italian debt auction, while the rise in yields at the German 30-year reflected the reduction in safety plays. Eurozone confidence data also came in stronger than expected, while U.K. lending date pointed to potential success of the Funding for Lending Scheme.

[EUR, USD]
EUR-USD posted strong gains to take out barriers at 1.3500, 1.3510, 1.3525 and 1.3550. Buying interest was noted from macro funds, short term specs and momentum accounts. The ongoing improvement in eurozone sentiment aided the upswing, which saw more persistent EUR-GBP demand and heavy demand for EUR-JPY after it cleared long-term resistance at 123.10. EUR sentiment was reinforced by a stronger than expected economic confidence reading and another fall in refinancing costs at today's Italian debt auction. The improvement in risk impacted the German 30-year auction, which saw refinancing costs rise as investors put their money to work elsewhere. The ECB alloted EUR 3.7 bln at the 3-month LTRO compared to the EUR 6.2 bln maturing, which also provided the EUR with a small fillip from the 1.3530 area over 1.3550, leaving prices skewed to the next resistance levels at 1.3575-80.

[USD, JPY]
USD-JPY moved to new trend highs on macro demand and extended speculative interest for the crosses. USD-JPY firmed up from 90.90 at the European open and cleared 91.40 after EUR-JPY extinguished large 123.00 barriers and long-term resistance at 123.10. The cross reached the 123.85 area on a combination of yen weakness and broad euro gains. In Asia, there was also heavy Japanese retail demand for AUD-JPY, which tripped stops over 95.00 to reach multi-year highs just shy of 95.50. The pick up in U.S. Treasury yields was a factor in USD-JPY's upturn today after 10-year yields move firmly over 2%. However, further USD-JPY upside is likely to meet very strong resistance due to large outstanding 91.50 barriers and related plain vanilla strikes. There are up to $10 bln worth of strikes scattered at 90.00, 91.00 and 91.50 for tomorrow, which has attracted gamma hedging (dollar selling). 91.50 barriers also begin to expire tomorrow and should be well defended, while there is also good resistance at 91.47.

[GBP, USD]
Cable experiences limited upside under offers at 1.5770-80 and 1.5800. However, it has posted a small relief rally in the last 24 hours on the coattails of EUR-USD strength, which carried it up from the 1.5700 region. One major influence on Cable is the persistent gains in EUR-GBP, which has been boosted by real money and European central bank flows. Asset managers have reportedly been switching funds back into the eurozone on continued evidence that conditions are improving in the region. The cross traded just over 0.8590 as short term longs target a breach of 0.8600 barriers. Cable could garner some support today on dips from talk of demand related to a U.K. dividend payment, but overall it is still struggling due to a congestion of sell orders on strength. U.K. data today saw a pick up in U.K. mortgage approvals and net consumer credit also expanded.

[USD, CHF]
EUR-CHF was buoyed by broader EUR strength. EUR-USD cleared 1.3500 and EUR-JPY broke long term resistance at 123.10, which boosted EUR-CHF from 1.2430 over 1.2460. A weaker than expected Swiss KOF leading indicator added a bit of traction from 1.2455, but overall it is ongoing EUR supportive flows that are driving price action. One caveat for EUR-CHF longs is the notable pick up in swissy demand. Sources tell us that CHF has been one of the most heavily bought currencies in recent sessions as corporates and private client capitalise on recent swissy losses. Hedge funds are still positioning for EUR-CHF upside, but it has struggled to sustain movement over 1.2500. USD-CHF is also showing limited upside after it moved just under 0.9200 on European corporate hedging on Tuesday and sellers are noted into 0.9230 and 0.9250 today.

[USD, CAD]
USD-CAD found support ahead of 1.0010 after it corrected the recent rally. The more dovish BoC policy stance last week is now fully discounted and CAD$ is trading off strength in oil and equities. The positive risk appetite combined with weakening USD-CAD technical indicators fueled sell-interest from 1.0030 at the Asian open and it threatens to force through stops if 1.0000 gives way. There are bids that lie ahead, but another positive session for risk could change the near-term picture. Under 1.0000, previous resistance at 0.9980 should encourage buyers.