This is a review of the elements likely to affect foreign exchange (Forex) trading in the European session:

Main headlines:

China Industry Gauge Rises as Easing Prospects Abate - Bloomberg

Fed to keep buying bonds despite firmer U.S. growth - Reuters

US company results raise fresh fears for economy - Financial Times

Draghi Set to Defend ECB Bond Buying - Wall Street Journal

FOREX action

EUR: The euro firms across the board after yesterday's deep loses. Moody's rating cut of five Spanish regions was to blame as well as some weak confidence numbers in France and the Eurozone. Today, all eyes are set on the October flash PMI data in France, Germany and the Eurozone. The IFO survey and Draghi appearance before the Bundestag are also scheduled. EUR-USD trades a tad below 1.3000 and rebounds from the 1.2950 area. EUR-JPY is edging higher close to 103.70.

GBP: The sterling crosses go hand in hand with the euro ones. Cable bounces back to 1.5975 while GBP-JPY is below 127.50. EUR-GBP trades near 0.8130. Today we have a data-shy calendar in the UK. Tomorrow the ONS will release the first estimate of third quarter GDP. Consensus forecast points to a pick up in activity on a quarterly basis.

CHF: The Swiss franc steadies against the dollar. USD-CHF is drawing a flag technical pattern and is now trading close to 0.9320. Meanwhile, EUR-CHF is still moving close to 1.2100. This level is the 'new normal' after many months hovering near the 1.20 floor set by the SNB.

Nordics: The Swedish krona and the Norwegian kroner are in the green versus the dollar and the euro. EUR-SEK is moving close to 8.6300 and EUR-NOK is trading at 7.4300 after breaking the triangle technical pattern. We expect some profit taking in these two pairs in the coming days.

USD & JPY: The US dollar and the Japanese yen came back yesterday with a vengeance due to increased risk aversion. The monthly FOMC meeting that started yesterday is unlikely to produce any change after September's additional measures. Monetary policy is poised to be very accommodative for the time being. USD-JPY is still trading below the 80 resistance zone.

CAD, AUD & NZD: The Aussie leads the pack of the so-called commodity currencies. AUD-USD is holding above 1.03 after improving conditions in the Chinese manufacturing sector. HSBC flash PMI for October rose to a three-month high from 47.9 to 49.1.

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