CAD/JPY

And There Was Another: The 21st storm is brewing in the Caribbean and could very well move towards the embattled Gulf of Mexico region.  Already with shutdowns prompted by Hurricanes Katrina and Rita, the potential for further damage sparked renewed concerns of refinery supply disruptions.  As a result, traders bid the crude oil contract higher on the New York Mercantile Exchange.  Rising over a $1, the front month contract for November delivery rose to $64.17 heading into the New York close.  As a result, with the current correlation between the commodity and the underlying Canadian major, the CADJPY cross was bid higher on the day in combination with a U.S. report that showed prices on the manufacturing level rose on higher prices paid for crude oil.

BOJ Minutes Leads Major Decline: Remaining split 7-2 for the most recent meeting, the Bank of Japan policy meeting minutes showed that central bankers remain cautious of the current economic environment.  Although data has been to the upside with some notable pickups in consumer demand and capital investment, inflation still remains tepid at best.  As a result, Governor Fukui and fellow members remain steadfast in their resolution for confirmation through consecutive price increases before any hike considerations can come to the table.  However, most experts are already calling for 2006 as the momentous year for such an occurrence.

EUR/CAD

Fundamental Drive: Although figures seem to be picking up for the single currency major, downward pressure still exists for the euro as U.S. corporate repatriation and continued mentions of interest rate differential persist.  With no economic data for the day, traders bid the euro lower on waning interest from last week's massive winding of dollar positioning along with continued greenback interest on inflationary concerns, per this morning's manufacturing release.  As a result, tomorrow's producer prices for Germany and U.S. TIC data should provide some near term directional bias.

Canadian Interest Rates: Fueled by oil commodity correlations, traders additionally bid the underlying spot higher in anticipation of this week's central bank rate decision.  Already pricing in the 25 basis point rate increase, traders will be scrutinizing further rhetoric that may suggest continued tightening in the world's eighth largest economy.  However, sentiment reigns that tightening may be shortlived as recent economic data has been rather tepid. 

Technically Speaking: Bouncing after the touch of the 61.8 percent fib level at 1.4148, the EURCAD currency cross looks to be rising above oversold extension.  However, not being able to break through the 38.2 percent fib at 1.4227, the spot price may have further downside pressure going into the Asian session.  As a result, a secondary test of the aforementioned support looks probable with a break setting up for a definitive decline to 1.4091.

AUD/CAD

Australian Dollar Suffers On Waning Growth: Afraid that current commodity prices may ultimately take a hit, reducing the Australian economy's growth prospects, traders applied downward selling pressure on the Australian major.  Concerns over the New Zealand economy as regional productivity and economic factors become overheated have transferred as both economies rely on commodity exports to fuel expansion. The dip was a surprise on the day as the domestic currency still boasts a favorable interest rate when compared to subsequent global counterparts.

Anticipation Of Tomorrow's Data: Further speculation was bolstered by anticipation of tomorrow's international securities transactions in Canada.  Although last week's merchandise shipments figures were to the downside, expectations remain high of a better showing as benchmark equity indexes soared to fresh four year highs.  Although taken slight aback after crude contracts dipped about a week ago, investors still remain optimistic over investment potential in the region.

Technically Speaking: Similar to the EURCAD cross, the pair is currently retesting the 61.8 percent fib at 0.8837.  Hovering the level, the underlying spot looks to be oversold according to the Stochastic price oscillator, offering suggestions of a near term rise higher.  However, selling pressure may continue as the current price action looks to close below the aforementioned level.  A clear break would then provide a test of the 78.6 percent at 0.8808 with upwards ceilings of the 50 percent at 0.8858.

Richard Lee is a Currency Strategist at FXCM.