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USD tries to hold 79

10-Yr T-Note: +08/32..1.784%%.. USD/JPY: 84.24.. EUR/USD: 1.3260

EUR, GBP Rejected at Key Levels as Recent Rally Cools: The Dollar Index slipped to it’s lowest level in 2 months and is coming into some Key support marks.

Early indications Wednesday was that the USD will hold 79 as it works off this mark. The 78.60 area will be closely monitored as it represents a multi-month low for the index.

Economic data Wednesday was mixed to slightly down as housing starts missed expectations and MBA Mortgage Applications decline 12% week over week. Building permits came in better than expected and some of the weakness in this morning’s numbers will be dismissed due to seasonal factors.

Fiscal Cliff talks are up in the air as the 2 parties attempt to find common ground. A vote on Speaker Boehner’s ‘Plan B’ is expected in the House Thursday.

The EUR continued to push to multi-month highs as it rallied to the 1.3300 mark for the 1st time since 1 April, that mark offers resistance as the single currency has slipped back to 1.3250. Strong economic data provided the early lift to the region as the latest German Ifo survey beat expectations, Spanish and Italian industrial new orders both beat consensus estimates. The pullback will be closely monitored but should not come as a surprise given the aggressive 5% run against the USD since mid-November.
The GBP continues to trade with the EUR as it rallied to 1.63 before being turned back. The Cable has dipped back to 1.6260 but is holding that support. The rejection at 1.6308 is notable as it fell short of the 15-month high of 1.6309 set on 17 September. The Bank of England released the minutes from it’s latest meeting early Wednesday. The commentary showed that no members voted for an extension to the current QE program, and that most viewed the economy as being flat in Y 2013 with inflation continuing to run above the 2% target.

The JPY slowed its pace, and is still weak following the political transition from Sunday’s elections. Another weak round of trade data this morning will lead to further speculation that Shinzo Abe’s LDP will attempt to devalue the yen in order to boost exports. The 85 area will set up as a Key test for support against the Greenback. Currently 85.52 set back in April 2011 stands as a 25-month low. The move against the EUR is even more pronounced as the cross has dropped approx 15% since hitting an multi-year high of 94.12 in July. The EUR/JPY cross is now testing the Key 110 support which has held its ground since the Summer of 2011.