Consolidation continued across the FX market in Asia. JPY posted the most prominent move on the session after Economy Minister Amari provided the voice of reason after the very dovish policy rhetoric from most Japanese officials of late. Amari said the yen had come to a good level and a further sharp drop could harm the country's economy. USD-JPY fell from the 89.60 area towards 89.00 and stops accelerated the fall, which ended just in front of 88.60 before prices stabilised close to 89.00 over the remainder of the Japanese session. EUR, GBP, AUD and NZD all backed up due to JPY-cross selling, but overall they were confined to Monday's trading range. EUR is close to 1.3050, GBP around 1.6075 and AUD at 1.0550.

[EUR, USD]
EUR-USD washed out weak stops under 1.3340 on Monday amid another round of fund profit taking, but further losses were contained by a very strong bid in EUR-CHF, which moved sharply over 1.2300 and extended to 1.2340 by the N.Y. close. The speech from Bernanke did not provide much impetus for FX markets, leaving EUR-USD range bound relatively close to 1.3350. In Asia, it made an attempt to clear offers from 1.3380, but ran into good order flow ahead of 1.3400, while EUR-JPY's drop from 120.00 to 118.30 also weighed. Dip buying is still likely while 1.3300 holds, while on the topside there are now strong offers building over 1.3400, which may make it difficult to test 1.3500 resistance without any fresh news to encourage more long positioning building.

[USD, JPY]
JPY should still meet selling pressure on upticks into next week's BoJ policy meeting, where expectations are high for more policy stimulus, along with an agreement between the government on inflation and growth. USD-JPY met very strong importer bids into 88.60 and more strong support is noted at 88.50, which should protect a round of sell stops below. However, USD-JPY may experience more choppy action between current levels and 90.00. These structures are more likely to provide larger resistance than some of the other levels that have given way in the recent upswing.

[GBP, USD]
Cable has traded a relatively tight range. The GBP upside was weighed on Monday amid short term selling pressure after a good offer from Middle Eastern account capped at 1.6170 on Friday, which encourage a build up of fresh short positioning. Movement into 1.6050 and below is still limited due to residual reserve management flows and natural hedging activity that is anticipated into 1.6000 and below. Cable could also benefit if EUR-GBP corrected some of its recent gains. Currently, it is trading around 0.8300 after it pulled back from yesterday's new trend highs around 0.8325.

[USD, CHF]
EUR-CHF reached new trend highs at 1.2385 in Asia amid talk of a large CHF-JPY sell order by Japanese banks. The catalyst for the order was very heavy EUR-CHF demand on Monday from fast money and model funds, which drove it up through 1.2250. It took off from 1.2260 during the N.Y. afternoon and extended just above 1.2340 on stop losses. EUR-CHF has been on the rise since last Thursday after Draghi acknowledged an improvement in eurozone markets, along with more measures by Swiss banks to dampen CHF deposits. Last week's announcement by ZKB to target small savers reinforced a flight out of the CHF amid fears over further policy measures. EUR-CHF has corrected the Asian rally by a modest amount and pulled back to 1.2300, but the short term picture is now skewed to a 1.2400 test and possibly an overshoot to 1.2500 bearing in mind the 3-mth and 6-mth strikes that changed hands between 1.2500 and 1.3000 yesterday.

[USD, CAD]
USD-CAD is close to the 0.9850 area after it pulled back from 0.9865 in North American dealings and found support once again near 0.9830. With a large batch of bids reported into 0.9800, shorts appeared to have taken a break, as traders noted short covering from model funds and IMM types. Option backed sellers were reportedly in place from 0.9880.