The Yen crosses were the main movers after the FOMC announcement and large stops were triggered in USD/JPY above 83.00 when a barrier was breached. A combination of positive risk sentiment and negative USD sentiment were enough to drive pairs like EUR/JPY up 1.5% on the day.
The last few days in Asia have been very quiet indeed with 10 pip ranges being the norm but I expect to see a bit more volatility today now that we are trading at fresh levels in many of the major pairs.
USD/JPY took out some huge selling interest just ahead of 83.00 and triggered stops above there in a show of strength by the Yen bears. The market is supposedly extremely short of Yen already, but it’s certainly not trading that way. The next obvious technical target is a daily high at 84.15 (see chart) and if we can test that level before Sunday’s Japanese election then the Yen bears really are completely in charge.
AUD/USD also took out a barrier and has breached the bearish trendline which was forming the top of the weekly wedge (see chart) and now looks to have the potential to move higher towards 1.10 in coming weeks. Momentum remains slow and with the speculative market already itting long, any major rallies will run into profit takers. More minor economic data is unlikely to have an effect but I do expect to start hearing statements and comments from the RBA re the AUD level.
EUR/USD has unwound most of last week’s losses on the back of a rampant EUR/JPY but there are 3 daily highs between 1.3120/70 which should seriously slow down bullish momentum (see chart).
EUR/JPY accelerated once it broke above 108.00 and the obvious target now is a daily high at 111.45. I’m having a bit of trouble believing 100% in this move, firstly because it’s December and secondly because all positional reports suggest that the market is extremely short of Yen already. We have been expecting some profit-taking to emerge ahead of the weekend election and perhaps it starts now after the gaps higher last night?
Cable remains the most range-bound of all pairs, dominated by option plays, and the CHF might also be preparing for a reversal although that’s unlikely to happen before the fiscal cliff negotiations are
signed off on.
Good luck today.