The dollar is trading on the softer side in early Europe following Thursday's correction. More U.S. data strength encouraged dollar demand, but EUR held the 1.2900 handle and Cable found very strong support from 1.4920. A GBP short squeeze was the catalyst for a broad based adjustment. Option related demand was heavily tipped, but there was also standout interest from leading U.K. accounts that were covering shorts ahead of a television interview with BoE Governor King. He said that GBP was now properly valued and it was not seeking to push the pound down. In the short term, momentum indicators for EUR and Cable are more favourable now, though the long-term is still for lower levels. A thin European data calendar today may see position adjustment influence. In the U.S., there is a heavy data calendar to digest and in recent sessions positive releases have fueled dollar buying interest. It includes February CPI, the March Empire State index, January TIC flow data, and February industrial production.

[EUR, USD]
EUR-USD traded back over 1.3030 after it rebounded from new 2013 lows at 1.2912 on Thursday. After Thursday's correction there may be more sideways action today. The long-term trend is lower, but momentum was damaged by the rebound from the 1.2910 area and positioning is still overstretched at current levels. Further offers are tipped into 1.3050, while a break of key resistance at 1.3075 would cast doubt on the recent down trend.

[USD, JPY]
USD-JPY firmed up to the 96.30 area on importer demand and short term interest after the upper house voted in favour of the three BoJ nominees, while the government also upped its economic assessment for the third straight month. USD-JPY struggled to sustain higher levels due to exporter offers and order flow from range players and this looks likely to cap into the weekend. The JPY crosses were supportive, with EUR-JPY trading above 125.00. AUD-JPY was easier due to option related offers ahead of 100.00, which capped on Thursday and left it close to the 99.70 area by late Asia.

[GBP, USD]
Cable is holding firm around 1.5130 after the sharp squeeze up from 1.4920 over 1.5100 on Thursday. London names focused on Monday's large 1.5100 expiries and there is also large 1.5150 strikes rolling off today. The turnaround in GBP also came ahead of a U.K. television interview with BoE Governor King, who said it was not seeking to push GBP down and is now properly valued. This raised speculation that the Bank may be concerned about inflationary pressures associated with a weaker currency.

[USD, CHF]
EUR-CHF was unable to sustain firmer levels on Thursday as large offers from 1.2370 capped gains. A USD-CHF retracement from new trend highs of 0.9567 back to 0.9450 weighed heavily on the cross and it traded back into the 1.2310 region. On an intra-day basis, EUR-CHF looks likely to trade the range with support noted into 1.2300 and offers beginning to enter the market from 1.2345-50. USD-CHF will take its guidance from the U.S. data releases due later today. In recent sessions U.S. data strength has boosted dollar demand.

[USD, CAD]
USD-CAD is heavier after it experienced aggressive selling on Thursday after it took out stops at 1.0240 to print three week lows around the 1.0205-10 area. Short term specs, which were active on the way down on Thursday, may be tempted to test 1.0200, where another round of stops are tipped just below. Offers on the topside are now lowered into 1.0240-50, which was a previous prop in recent sessions.