It’s going to be all about the Yen again today after USD/JPY exited its short term consolidation by breaking above 81.50 and EUR/JPY has moved higher to test important technical resistance at 104.80.
The economic calendar is relatively bare but for a change, we might see Japanese data creating some interest. The new found volatility in the Yen crosses might encourage some activity after the trade balance data is announced. Chinese and Australian leading indicator indices are unlikely to create a stir.
In EUR/JPY, the 61.8% retracement of the 5-wave down-move from 111.40 to 94.10 comes in at 104.80 and there is also the upper end of a parallel trading channel just above there (see chart). This level is certain to attract plenty of attention today.
USD/JPY broke above its Fibo resistance level at 81.50 and the lack of any pullback at all will have the bulls feeling very comfortable. The long term charts look to be forming a springboard for a move higher and my initial target is the 200-week MA, currently at 85.20, which was last breached 5 years ago (see chart).
Any EUR/USD movements will depend almost entirely on what happens in EUR/JPY. If USD/JPY stays well bid but EUR/JPY resistance is tough to breach, then obviously EUR/USD will start easing lower. On the other hand, if EUR/JPY breaks higher then we could see acceleration higher in EUR/USD as well. Interbank reports suggest plenty of small but regular batches of stop-loss orders above 1.2835.
The AUD has lost some momentum from yesterday but is still very firmly in range trading mode. Reserve currency chatter and AUD/JPY buying are the main supporting factors but increased chances of a December rate cut are weighing on the Aussie. It’s hard to see any significant moves happening today.
Cable is opening exactly where it was for the whole day yesterday, the CAD might lose some bullish momentum after oil prices turned lower on a possible ceasefire in Gaza, and EUR/CHF is consolidating just above recent lows where the SNB are reportedly starting to buy.
Good luck today.