Forex Morning Round-up: Mixed Market Sentiment Ahead of Eurozone Current Account Figures

on Nov 16, 2012

**News of Preliminary Elections in Japan Still Feeding In Through the Forex Market**

The Japanese yen steadied on Friday after plunging to a 6-1/2 month low against the dollar with most analysts still trying to figure out whether the currency has entered a new weaker phase against its major rivals or its dramatic drop this week was simply an outlier.
At 08.20 GMT the dollar was changing at 81.01/03 against the yen after reaching a session low of 80.90. According to the market is in consolidation mode after rallying to the 81.46 high and has been in decline during the Asian session.

“USD/JPY has cleared the 80.63/66 major resistance area and this means that it has based from a longer term perspective. From a longer term perspective, we consider that the currency pair is well placed to make further gains to the 2011-2012 resistance line at 83.23” wrote Karen Jones, an analyst at Commerzbank.
Today the House of Representatives in Japan was dissolved by Prime Minister Yoshihiko Noda, marking the first step towards December preliminary elections. Shinzo Abe, opposition leader and the favourite for the win, has called for Bank of Japan rates of 0 percent or below, an inflation target at 2 percent and a GDP growth target at 3 percent.

On the downside the USD/JPY will see support at former-resistance-turned-support 80.60 to 80.70, with 80.55 cited as 38.2 percent retracement of the pair’s most recent rise from 79.07 yen on November 9 to its Thursday high.
!m[](/uploads/story/833/thumbs/pic1_inline.png)”If current yen weakness is just because of speculation caused by the comments from PM Noda and possible next PM Abe, it is unlikely to be sustainable,” opined Tohru Saski, FX strategist at JP Morgan.

Investors Cautiously Wait on Eurozone Current Account Figures
At 08.45 GMT the EUR/USD was back around the 1.2750 area after climbing to a session high of 1.2787. Sentiment on the market remains subdued in anticipation of Current Account figures from the Eurozone. Analysts expect the surplus to widen to €9.2 billion (£7.39 billion) during September, from €8.8 billion (£7.07 billion) in the previous print.

Most euro crosses have given up some of the gains from the last few days – EUR/AUD and EUR/CAD are following the EUR/GBP in its downward slide and all three pairs are trading in the negative region with losses of 0.28 percent or more.
The currency market’s attention is now focused on the upcoming budget talks between US President Barack Obama and leaders from Congress. Investors remain fearful that the world’s biggest economy could slip back into recession if no deal is reached to avoid or alleviate the $600 billion (£378 billion) tax hikes and spending cuts due to take effect in the first month of next year.
On Europe’s political front EU Commissioners Olli Rehn and Michel Barnier will be attending EU-Russia economic dialogue, while the Spanish government will hold its usual Friday meeting, possibly providing some fresh news to a market hungry for more updates from the Iberian Peninsula.
**The Australian Dollar in Positive Territory Ahead of News from the RBA**
As of 09.00 GMT the Aussie was in positive territory at $1.0341/43 or 0.09 percent higher than the previous session. reported that the AUD/USD lost some ground overnight but found resistance at the daily Fibonacci S1 level at 1.0311 before starting its morning climb.
However, geopolitical pressure is containing the Australian dollar as Israel and Hamas continued their military strikes against each other. “Increased geopolitical pressure in the Middle East intensified, with this eliciting the broad risk-off tone,” said Emma Lawson, currency strategist at Westpac. “While this continues, we can expect a certain degree of market caution.”
Looking ahead the market is anticipating the release of the Reserve Bank of Australia (RBA) policy meeting minutes. Economists were left disappointed last week when the RBA decided to keep interest rates unchanged at 3.25 percent. “The RBA’s November minutes could give insight on how close they were to easing,” said Scott Haslem, chief economist at UBS, as quoted by the Wall Street Journal.


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