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As the East Coast braces itself for Hurricane Sandy, currency traders are shedding risk as we begin what will no doubt be a very abbreviated trading day.  Currency markets continue to trade despite the fact that the US equity markets will suspend trading today in spite of the storm.  As we begin the week, the Hurricane is on course and that will take it over Washington DC, Baltimore, Philadelphia and New York.  The storm is expected to hit the New York Metropolitan area late Monday night, early Tuesday morning.  All transportation systems have been shut down in the area, as well as most non-essential government offices. Power outages are expected throughout New York, New Jersey and Connecticut.

But the currency markets trade on.  The EUR has dropped below the 1.2900 level after poor results on Spanish retail sales accelerated selling and had the currency test support at 1.2885.  The currency has since rebounded and has straddled the 1.2900 level.  The economic calendar today in both the Euro zone and the US, and with US markets closed today due to the storm, trading should resemble a US holiday where some traders are in and some are not.

Liquidity today is expected to be light, as any traders coming in, will probably be leaving early.  Technical support in the EUR is at 1.2885, 1.2860 and 1.2835.  Resistance appears at 1.2955, 1.2970 and 1.3015.  The EUR remains in its long traded 1.2800-1.3170 trading range but the direction is definitely lower at present.  It has been reported that the Troika is pushing towards another round of debt write off for Greece, and this is not sitting well with Germany, so this could become a major story moving forward.

Following the EUR lower, the USD/CAD has crept ever closer towards parity in European trading on Monday morning.  Technical resistance on USD/CAD is at 1.0010, then 1.0030 and 1.0065.  Support enters at ,9960, .9925 and .9905.  Despite the fact that Hurricane Sandy is a dominant news factor, the price of crude has moved lower and this is affecting the Canadian dollar negatively.

Market focus remains on the BOJ and their meeting tomorrow.  Markets have been anticipating additional easing from the Bank of Japan, as it is speculated that the BOJ will expand JGB purchases by another JPY 10 trillion.  There is further speculation that the BOJ may introduce an open-ended operation for their quantitative easing program until they reach their inflation goal.

As stated earlier, U.S. stock trading has been canceled for today and possibly tomorrow due to Hurricane Sandy.   Asian equity markets were almost all lower overnight, as are the European equity markets this morning.

A short day for us today.  To all of you in the anticipated path of this storm, please make sure to take all measures at hand to remain safe.  As long as the power is on, there will hopefully be a morning report tomorrow.

Be safe and hunker down.