• USD/JPY +0.5%
• EUR/CAD -0.5%
• AUD/CAD -0.4%

USD/JPY

Dollar Longs Reinitiated: Bolstered by a lower then expected Eco Watchers Survey, yen bears pummeled the domestic currency during the session.  With carry traders reinitiating positions ahead of the household spending figures, dollar optimism was favored as bids pushed the underlying spot price back above the 118 figure.  The move was mostly unsurprising, retracing most of the gains made from profit taking yesterday, as further buying on dips was expected.  Additionally, previous yen strength was seen as temporary with the price action seen as simply reactive speculation to thin market sentiment.  Traders will now place positions ahead of the near term consumer confidence data as greenback expectations are for a repeat decline.  Should the figure surprise to the upside, attention will then turn to household spending in lending the yen some near term strength.

Rumorville: Offers above current price action is keeping the spot from rising much further as we head into the asian session.  With that said, selling interest currently resides at 118.80 and the 119.00/10 region. Comparatively, bidding on further carry trade interest looks to hover the 118.20 and 118.00 figures providing support in the near term.

EUR/CAD

Canadian Dollar, The Stronger Leg: Euro data was thin today with the set releases for the Zone not really being considered by the market.  However, what drove offers through the session were higher Canadian housing starts as construction activity on new resident properties rose 6.6 percent.  Powered by higher consumer propensity to spend and a tighter labor market creating rising earnings, housing starts were additionally revised for the month of December.  This now backs a growing sentiment that expansion is imminent for the worldââ,¬â"¢s eighth largest economy, rising 0.2 percent last quarter.  However, the happy good times may be temporary as the central bank is increasingly considering another rate hike in the short term in order to curb any inflationary pressures sparked by the higher rate of growth.  The subsequent higher costs of borrowing are sure to crimp housing start activity as mortgage applications decline on lessened consumer interest.  Nonetheless, the expected rise in interest rates is anticipated to lend some favoritism to the loonie as crude oil contracts continue their current pullback.

Rumorville: Offers on the underlying major Euro leg are keeping the component lower on the cross as well.  Sellers are rumored to be located at 1.1975/80 and the 1.2000/10 with stops located just above at 1.2020.  Canadian interest can be witnessed in the offers for the USDCAD currency pair with continued selling at 1.1560/65 and 1.1580.

AUD/CAD

Unchanged Decision Leads To Australian Sell: Narrow trading ranges for the AUDCAD currency pair as further selling pressure kept the underlying cross at bay during the day.  Already slowly declining last night, traders bid the pair lower on expectations that rhetoric, as well as the decision, would be rather staid.  The central bank didnââ,¬â"¢t disappoint, leaving the short term interest rate at 5.5 percent.  Although growth has been witnessed in the region, soft patches still occur leaving policy officials to conclude that there is no further need for higher rates at this stage.  This is contrary to what some had surmised given the rise in consumer prices of 0.7 percent on the month.  Comparatively, with rates still ready to rise further in the Canadian economy, capital looks to be shifting from a plateauing economy to one with higher rate of return possibility.

Rumorville: With further and tighter trading expected in the Asian session, bids for the Aussie denomination reside at 0.7365/70 with continued interest below at 0.7310/15.  However, offers are expected to spark near term ceilings at 0.7420 and 0.7445/50 with stops below at 0.7315 under current price.

Richard Lee is a Currency Strategist at FXCM.