EUR/AUD
Politics Takes Front Seat: In a somewhat expected move following a meeting Sunday, incumbent Chancellor Gerhard Schroeder elected to step down leaving Angela Merkel the newly elected chancellor of Europe's largest economy. Finally ending the three week standoff since the general election, Merkel stands to be the first woman chancellor in German history with coalition concessions to the incumbents political party, Social Democrats. More specifically, eight positions will be given to SPD officials in Finance, Foreign Policy, Justice, Development, Labor and Social Security, Health, Transport and Environment Ministries. Notably, this now places Wolfgang Clement in the outgoing government with his successor being former conservative chancellor candidate Edmund Stoiber.
Fundamental Outlooks: Although the end of the political standoff did alleviate some uncertainty in the euro zone, fundamental data released during the session added some further downward pressure on the underlying currency, reversing earlier sentiment. Notably on the day, Germany's current account surplus narrowed from the 7.3 billion euro sum last month. Smaller at 2.5 billion, the surplus looked to be narrowed on exports rising 3.5 percent higher while imports soared 6 percent higher. Additionally, French industrial and manufacturing production were relatively in line with earlier estimates.
Technically Speaking: The underlying cross currency looks to have established a temporary bottom right above the previous support of 1.5850. Lending to the notion of further upside potential looks to be the peak above 30 in the RSI. However, a break above the near term ceiling at 1.5900 will be required before any potential can be realized.
AUD/JPY
September Business Survey Anticipation: Anticipating an optimistic report, traders bid the underlying Aussie major ahead of the National Australia Bank September Business Survey.
Expected to feed further positive good vibes of the land down under, for the first time in a year, the report is expected to reflect growing optimism of the approaching holiday season by business executives.
However, there still remain ongoing concerns over the increasing cost of crude oil and energy prompting a good percentage of retailers in being simultaneously cautious. Additionally, traders will be scouring any figures or innuendos that may prompt further hawkish considerations by the RBA. Last week, the Reserve Bank of Australia left interest rates at their current level.
Bank Of Japan: Policy makers entered their two day meeting in order to further evaluate current economic conditions in the world's second largest economy. Although expected to not move on rates from the current zero standing, traders are going to be scrutinizing any indications that a shift in monetary policy may be coming sooner than later. Consensus expectations are looking towards the end of the fiscal 2005-year in March as the earliest possibility. Even with retail sales, consumer confidence and capital spending on the rise, central bankers look to remain steadfast on their prerequisite of consecutive months of price increases before considering the aforementioned.
Technically Speaking: After testing the 61.8 percent fib from the near term move, the currency cross is consolidating between 86.70 and 86.51 (50 percent fib). With the oscillator favoring the downside, peaking below the 70 figure, a confirmed break below the current floor would lead to an imminent test of the 38.2 at 86.32.
AUD/CAD
Rate Considerations: With optimism regarding the anticipated business survey, traders may be looking for further carry trade notions in the currency cross.
Currently standing at 5.50 percent, short-term interest rates may rise again if inflationary considerations remain high in the region, as noted by some economists.
Oil Focus: Recently dipping further at the start of the week, oil prices have since declined from their lofty $70.85 highs on August 30th. What may cause speculation of a resurgence is the oncoming fall season in the northeast. A time known to drive prices higher, supply concerns coupled with current production bottlenecks may bolster prices once again, leading to a test in the underlying Canadian major. However, until then, light economic data may not boost the currently consolidating loonie.
Richard Lee is a Currency Strategist at FXCM.
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