AUD/JPY
Aussie Inflation Bulls: Lending to earlier speculation of a renewed rise in the overnight cash rate, both home loans and investment lending figures rose on the month. For September, home loans soared above the previous 0.2 percent decline to rise 4.6 percent, more than double the 2 percent expected. It seems that with continued growth and positive sentiment in the region, consumers are more willing to expand their residential consumption given the pass on an interest rate hike opportunity on August 8th. Additionally, investment lending rose 2.1 percent, reversing a previous dip of 4.3 percent in the prior month.
Eco Data Disappointment: Conversely, leading short term declines on the Japanese yen side, the eco watchers survey was released in line with previous results. The current outlook was slightly more pessimistic given the survey expectations of 52.2, printing a 50.7 reading. Not only were current views disappointing to yen bulls, machine tool orders were equally negative, rising only 0.8 percent against the previous 3.6 percent spike. However, with the figure widely regarded as volatile, the results beared less on the market in comparison to the watch survey.
Technically Speaking: Bouncing off of the 85.82 figure in the overnight, the cross currency was bid after a bout of consolidation. Forming a support after a decline from the textbook head and shoulders, the underlying broke through upside ceilings at 86.01 and 86.35 with not even a flinch. However, currently it seems to have halted above the 50 percent fib from the 2-week move. Following previous price action, the underlying looks to consolidate once again in a comfortable range between 86.83 and 86.59.
AUD/CAD
Loonie Inflation Bulls: Comparable to its Aussie peer, the Canadian dollar witnessed some bidding interest on the session as Bank of Canada Governor David Dodge further suggested at near term rate hikes. The governor, speaking at a luncheon in Montreal, stated that the current long term rate of inflation was "well anchored" while the economy has grown to its full potential ahead of schedule. As a result, to combat price inflation in an expanding economy, rates will need to be adjusted in the shorter term. Especially noted by the central bank was the job creation in the month of October. For the month, 69,000 positions were created completely crushing the 19,000 expected by economists. Price action was subsequently contained with buying interest on both sides of the cross currency.
Oil Resurgence: The Canadian denomination garnered strength earlier on as oil prices witnessed a resurgence of interest. Tossing aside the 4.5 million barrel weekly rise in the weekly inventory release, traders bid the crude contract higher on the NYMEX as concerns over supply in the Northeast resurfaced. However, with interest waning going into close, the contract is likely to close below lending some near term weakness as we enter the Asian session.
Technically Speaking: Trapped on the tug o war between the two major legs, the underlying price action looks to be well contained in the near term. Providing barriers are the 38.2 and 23.6 percent fib levels from the month's move. With consolidation finitely defined, some upside potential remains for the cross until the rise looks to be capped at the 50 percent fib at 0.8771.
EUR/AUD
Here We Go Again: Further selling in the euro single currency occurred on the session as riots and violence continued in the nation of France for the thirteenth day. The recent debacle has overshadowed hawkish rhetoric issued by the central bankers in recent days along with positive economic data for the German economic released this morning. According to officials, the region's largest economy experienced a better than expected rise in the trade surplus. Expected to rise to 13 billion euros, the surplus added to 15 billion as imports fell by 1.2 percent against a stronger export increase of 2.5 percent. However, disappointing was a dip in the wholesale price index. Rising 1.7 percent for the month, the index dipped 0.1 percent, countering some arguments by policy makers that inflation is through and throughout the economy.
Carry Traders: With tumultuous times dominating much of the hawkish rhetoric issued by policy makers, traders turned their focus, if not near term, on the carry trade potential of the cross pair. At the current moment with the RBA likely to shift once again to a tightening bias, traders are regarding recent EBC comments as nothing more than further jaw boning in the region and expecting a further widening of the rate differential between the two economies. As a result, further selling looks to plague the pair until hawkish statements can realistically materialize.
Technically Speaking: Further downside is in store for the pair, currently being driven by momentum selling. However, testing the 1.5950 figure, a dead cat bounce or temporary retracement is a possibility with upside tests at the 23.6 percent fib level an inevitable scenario in that situation. Rises look to be capped by the 38.2 percent fib at 1.6079 in the short term.
Richard Lee is a Currency Strategist at FXCM.
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