USD/JPY maintains 118.00 handle

USD/JPY opened in Asia at 108.40 after a whippy US session that resulted in USD/JPY topping out at 109.15 and dipping below 108.00 at one stage when the soaring gold price sent the USD broadly lower. The Asian session was much quieter, as the market decided the Moody’s Japan downgraded wouldn’t impact JPY FX flows. USD/JPY eased to 108.23 in early Asia on AUD/JPY selling flows before Japanese bids ahead of 108.00 discouraged attempts lower. USD/JPY spent the rest of the very quiet session drifting higher and it was trading around 108.45 heading into the afternoon session. The range for the morning was 108.23/50.

USD/JPY will likely consolidate for the next few sessions, as the US non-farm payroll data on Friday may set the tone for trading into year-end. The key to short-term JPY direction will be investor risk appetite, which appears to be waning as volatility increases. The daily tankan line has been decent support since the trend higher commenced. The tankan line ascends to 118.19 today and a close below that reading would warn upward momentum is waning.

EUR/USD opened the Asian session at 1.2469 after getting a boost from broad USD weakness sparked by a huge rally in the gold price. The Asian session decided to sit this one out, as far as EUR/USD was concerned, and it could only manage a 1.2462/76 range through the morning and it was trading at 1.2465/70 heading into the afternoon session. The market is very short EUR/USD and it was supported yesterday despite soft EZ MFG PMI data while the US ISM MFG data came in a bit better than expected. There is talk of very good selling just above 1.2500 while buyers around the 1.2325 underpin the bottom end of the range. EUR/USD may continue to consolidate ahead of the ECB meeting Thursday and the key US non-farm payroll data on Friday. EZ Services PMI and Retail Sales are out later today and may cause some price action within the 1.2325/1.2525 range.

AUD/USD opened on Tuesday at 0.8489 and traded a 0.8470-0.8510 range in Asia; last at 0.8476. AUD/USD jockeyed around in a 30 point range waiting on the RBA decision but more importantly the statement. AUD/USD made an intraday high of 0.8506 on the better than expected building approvals data but remained weighed down on concern over wording in the RBA statement. AUD/USD went into the RBA decision at 0.8480 (prior range 0.8475-0.8510) and jumped back above the figure when the statement seemingly contained no smoking gun in terms of the currency. The move to 0.8510 was brief and AUD/USD quickly reversed back to levels it traded prior to the RBA decision. AUD has been a stark under performer over the last 24 hours getting no joy from the recovery in energy/commodity and precious metal prices. The break below 85 cents opens up for a deeper move into the low 80 cent region – a level where the RBA would be more comfortable. The world at large knows that Australia’s terms of trade is going to take an almighty hit in 2015 and that current AUD/USD levels are simply unsustainable.

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