• AUD/CAD +0.3%
• EUR/CAD +0.2%
• CHF/JPY -0.2%

AUD/CAD

Slow Day Turns Traders To Rate Statements: According to the Quarterly Monetary Policy Statement, the Reserve Bank of Australia continues to be vigilant of any rise in price increases as commodity prices continue to climb and wage growth continues to loom as a threat in the country.  However, with the statement already anticipated, many have regarded it tough talk as policy officials have effectively lowered the inflationary target to 2.75 percent for the year.  The rate is now comfortably in between the 2-3% band first established by the central bank and makes the current statements more of a threat to inflationary pressures rather than a confirmation of further interest rate increases in the near term.  Nonetheless, traders, wary of the high interest rate the Australian denomination offers, remain confident that a rate cut is out of the question and continue to bid the major leg against its Canadian cross counterpart.  Although Canadian interest rates are expected to rise further, the spread at the current momentum seems mighty alluring.

Rumorville: With bids broken heading into the Asian session at 0.7460, further bidding below at 0.7350 should keep the major lifted in the near term.  Keeping upside resistance looks to be offers at 0.7420/30 region.  On the flipside, CAD weakness looks to continue with further offers above at 1.1570 and heavy interest above the 1.1600 figure.

EUR/CAD

Commodities Take A Dive, So Does CAD: Traders preferred the Euro major leg of the EURCAD cross pair, as lower commodity prices lent to a negative bias for the Canadian dollar.  Although some carry trade spillage was felt from the aforementioned AUDCAD cross, more price action today seemed spurred by the recent pull back in base and precious metal prices, not to mention the recent downtrend in crude contracts.  The lower prices, caused by higher stockpiles and significant profit taking by institutions, have negatively affected the loonie as a good percentage of the countryââ,¬â"¢s exports are dependant on those raw materials.  In addition, bolstering Euro demand was this morningââ,¬â"¢s industrial production report out of Italy.  A follow up to the dour data seen last week in France, Italian output was higher than expected and lends to speculation that this weekââ,¬â"¢s German GDP may fair better than anticipated.  Previous concerns had been expressed of rising interest rates without just cause as output looked to trail off earlier on.  However, the figures give new life to brighter estimates for the regionââ,¬â"¢s largest economy, boosting the single currency in the near term.

Rumorville: Bids look to prop the underlying euro leg at the 1.1875/80 region with further consideration below at 1.1850 and corresponding stops at 1.1845.  With offers slightly above at 1.1910, option related demand looks to crop in at 1.1885/90 providing some near term volatility.

CHF/JPY

Positive Figures For The Yen: Yen bidders returned to the foray, at least against the less profiled Swiss franc, in the session as a wider than expected surplus lent to near term strength.  However, the underlying cross pair looks contained in a near term technical channel with a retracement imminent keeping bulls at bay.  Surprising the consensus, the regionââ,¬â"¢s current account surplus widened from the expected 1.5 trillion yen to slightly above 1.7 trillion yen.  The figure for the month of December, although better than the previous months, called some to caution as it seems that an increase investment income surplus offset a slight decline in exports.  This means that the mainstay of economic strength in the region, foreign exports, looks to be stalling while investment income props the figure up, lending to an overstated figure.  However, those fears were quickly quelled when it was revealed that industrial production rose for the fifth straight month.  Despite the number lending to further speculation of interest rate increases, traders still remain doubtful of any near term shift in monetary policy as policy officials remain hesitant.

Rumorville: Swiss major offers are located at round psychological figures of 1.3100 and 1.3200 with stops correspondingly at 1.3125.  Bids are remain thin at 1.3050 providing for continued bearish bias.  Comparatively, yen bullishness is reflected in USDJPY offers at 118.20, keeping the topside protected.  Further up at 118.50 are heavier considerations.

Richard Lee is a Currency Strategist at FXCM.