AUD/JPY
BoJ Talks The Talk: Speculation has spent another day in the headlines as Bank of Japan Governor Toshihiko Fukui tells reporters that the economy is nearing inflation. Comments from the long dovish monetary policy official have followed a line of announcements and remarks that have excited market participants into expecting a hike in the beginning of next year. The most recent remarks from Fukui were of the same clothe when he said the economy was “achieving a well-balaned recovery.” The BoJ has held its ultra-loose monetary policy for years in an attempt to rid the economy of deflation which has contributed to putting the economy in and out of recession for seven years.
Technically Speaking: Another wave of Yen-selling further pulled the the AUDJPY off of eight-year highs set last week. Optimism, however, could have finally come to an end this week with a confluence of technical levels providing stiff resistance. A rising trendline beginning in January has met the falling pair at 85.80, with the early November swing low at the same level and a long-term 38.2 fib of the Aussie rally beginning in the January at 85.92 providing further back up. The more probable move for the pair will be a profit-taking Aussie rally that would be unencumbered unitl the 73.6 fib of the recent month long swing at 87.31.
AUD/USD
A Third Chance For Trade Data: The AUDUSD was one of the few U.S. dollar-backed pairs that responded to the country's release of a slimmer than expected current account deficit. Market participants expecting the third quarter's deficit to swell to $204.8 billion were caught off guard when the government reported a contraction to $195.8. Against most of the other majors, the dollar was unable to rally on this news with each respective pairs' counterpart releasing its own data. The Australian economy however was left with an relatively empty fundamental calendar leaving the greenback to have its way. None the less, the rally was meager with the slightly lower deficit. Traders have been decreasingly exhuberant on trade data beginning with a greater than expected trade deficit on Wednesday followed by a far-better than expected TICs release yesterday.
Technically Speaking: As against the yen, the Aussie dollar has come up against large support against the U.S. dollar. Three indicators have lined up at 0.7420/30 to make the area a large rallying point for Aussie bids. A rising trendline from November has combined with the 50.0 fib of the recent Aussie rally at 0.7420 to contain the weak move the greenback made in today's session. Coincidently, the high for much of November at 0.7427 was adding its support to containing a further move. With this combination of support below the pair, a rise seems to be in order. A run up in the Aussie dollar will likely meet its first barrier at the 38.2 fib of the same Aussie rally at 0.7459.
EUR/AUD
German Confidence Rallies Euro: German business leaders have reason to cheer in December with the euro nearly 12 percent lower against the benchmark dollar this year, making their products more attractive in the global economy. Business confidence in Europe's largest economy rose to a five year high 99.6 this month according to the Ifo confidence index. With optimism running high for the economy that accounts for a majority of the Euro-Zone's growth, many economists believe the increased investment from German businesses will help to accelerate European growth in 2006.
Technically Speaking: Little stands in the way for an extended rally for the Euro, come next week, but the steep rally is could be subject to a round of profit taking. After today's euro run took out the 38.2 fib of the Aussie rally from April to June at 1.6107, their was little left in the way of resistance. The 50.0 fib of the same rally at 1.6286 is the next level technical analysts are looking for in terms of resistance. If the rally, that began on the 7th has exhausted itself, the pair would likely drift first to 1.6107 before testing the 61.8 fib of the Aussie rally from November 1st to the beginning of December at 1.6041.
Richard Lee is a Currency Strategist at FXCM.
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