Awaiting Bernanke, USD on Defensive

JPY weakens further; Eurozone industrial production disappointed; EURCHF rose. The only item for the US session is chairman Bernanke's speech. 2 The latest on those Jan 7-8 trades: 8 trades hit all targets, 3 were unfilled, 4 remain in progress & 2 stopped out. All 2 EURUSD longs hit all targets , 2 USDJPY hit all targets, 2 GBPUSD hit all targets, 1 EURGBP hit all targets, both Gold in progress, one of which missing the final 1679 target by 1 point. Both Silver longs in progress, 1 of 2 AUDUSD hit all targets, the other missing the highest entry of 1.0450 by 2 pips. Both CADJPY unfilled, 1 of which missed highest entry of 87.90 by 8 pips, Both EURJPY stopped out.

Despite the fact that Tokyo was closed for holidays, JPY continued to weaken. USDJPY rose to 89.62 as traders expect the PM Abe to choose a head for the central bank that shares his belief in easing efforts. The BOJ is expected to review the inflation target and possibly raise it from 1% to 2%. USDJPY fell slightly and trades around 89.30.

EURUSD initially rose to a new 11 month high at 1.3403 but now trades around 1.3360 after Eurozone industrial production fell 0.3% in November while analysts expected 0.2% rise. On a positive note, October's result was revised higher to -1.0% from -1.4%.

Other data showed that Italian industrial production fell 1.0% in November, marginally less than prior decline 1.1% and German WPI was flat in December after declining 0.7% in November.

EURCHF showed an unusual volatility and rose to 1.2276 which is a level last seen in December 2011. The key resistance is 1.2472 which is a high from October 2011 that was reached in reaction to the SNB announcement of the 1.20 floor.

According to MNI calculations, EZ sovereign t-bill issuance this week is seen around  EUR 15 bln, lower than last week's EUR 30.5 bln. Bond issuance is estimated at EUR 18.7 bln vs. 26.6 bln last week.

There are no US reports due today. Market volatility could heighten at 10:30 am ET when the BOC releases its business outlook survey and also by the end of the session at 4:00 pm when the FED chairman Bernanke speaks on monetary policy.