• USD/JPY -0.8%
• AUD/JPY -1.2%
• EUR/GBP -0.8%

USD/JPY

Trade Data Drives Dayââ,¬â"¢s Action: Japanese bidders returned on the day with U.S. trade balance figures being worse than expected.  The news drove dollar selling in the morning session, forcing the currency pair lower to rank it as one of the dayââ,¬â"¢s top movers.  However, bearish momentum waned heading into midday as trader paring of positions on profit taking, coupled with a better than expected assessment of the deficit, powered the greenback higher as we head into the weekend.  The deficit with China, which stood at a whopping $18.5 billion last month, narrowed 11.9 percent to $16 billion.  Although the figure looks to draw further attention from policy makers on Capitol Hill, the smaller number is a welcomed sight as the amount had previously grown in consecutive quarters.  Nonetheless, further potential selling looks to ensue as traders turn their focus on one main factor.  Investors will be visibly anticipating the net foreign purchases data due out next week.  Key to funding the current record deficit, market participants will be expecting a hearty figure in equalizing todayââ,¬â"¢s number.  Coincidentally, the Japanese denomination was bolstered by better than expected consumer spending figures.  Although still rather tepid on the monthly comparison, rising 0.4 percent, the spending data lent to increasing speculation of interest rate increases as it confirms uplifted consumer confidence.

Rumorville: With the weekend upon us orders look thin at the close with potential levels being set for the weekend open later on Sunday.  Bids continue to maintain support for the pair at 116.80 with corresponding stops below.  Additional stops reside above at 117.90.

AUD/JPY

A Positive Outlook For Japan: Bidders returned in full force against the Australian dollar as well pushing the underlying spot price below the 8700 figure.  Leading the charge, yen bulls favored overall household spending figures and rising private machinery orders.  Expected to increase by 1.5 percent in the month, the report vaulted 6.8 percent or almost 5 times as much as consensus had estimated, according to the Cabinet Office.  This, coupled with increases in consumer spending and anticipation of higher industrial production figures next week, pulled the cross lower even as the pair offers one of the largest carry spreads for traders.  A government report is expected to show the Japanese economy rise 5 percent annually in the fourth quarter, better than had been witnessed in the worldââ,¬â"¢s largest economy.  Furthering the notion of rising interest rates in the Japanese country, traders still remain cautious as Bank of Japan policy makers continue to reiterate the necessity of a rise in consumer prices.

Rumorville: With Japanese yen orders established, Australian major leg orders remain thin.  Small interest resides below the current support at 0.7350 with stops protecting further downside at 0.7450 in the short term.

EUR/GBP

Weaker All Around: Besides the spill over from todayââ,¬â"¢s euro decline against the greenback, the EURGBP cross was subject to an exacerbated sell off on dour economic data in the Euro zone.  Inflation remained tamed in Germany according to the most recent report as prices rose in line with earlier targets set by the central bank.  Prices declined 0.5 percent on a monthly comparison as the annual figure rose 2.1 percent annually.  This reaffirms earlier notions that energy prices may have served as a temporary shock to the region and calls into question any further rate hikes hereon in by central bank policy makers.  Additionally weakening the single currency were reports that manufacturing and industrial production declined in France as the countryââ,¬â"¢s trade deficit widened and gross domestic product fell.  Although rarely regarded as a heavy contributor to the overall zoneââ,¬â"¢s economy, the figures point to a potential scenario in the 12-nation amalgamation as growth prospects continue to run thin.

Rumorville: Buying interest looks tipped way above current spot price at 0.6850 as further offers speculated at 1.2040 keep pressure on the euro synthetic leg.

Richard Lee is a Currency Strategist at FXCM.