EURUSD - BREAKOUT
GBPUSD - BREAKOUT
USDJPY - BREAKOUT
USDCAD - RANGE
USDCHF - BREAKOUT
AUDUSD - RANGE
EURUSD <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Euro implieds continue to be suggestive of an imminent breakout in the underlying currency with both measures rising comparatively higher to last weeks readings. The differential between short and long term components have moved ever closer to the zero line, even turning slightly positive during the week. Subsequently, longer term implieds have continued to tick higher, accelerating off of the bottom formed by the previously extreme measure. Here, event risk is likely being priced in with investors mindful of the European Central Bank decision this week. Likely to spur further speculation on higher interest rates, hawkish comments by President Trichet will likely boost the short term component supporting an imminent test of the topside 1.2900 resistance figure. A technical close above would confirm the notion.
GBPUSD
In the same manner, sterling implieds additionally ticked higher as the underlying currency continues to approach resistance at 1.9100. The longer term measure has already lifted off of the bottom just below the zero line and looks to be contributing to the short term bias. Subsequently, this has lifted differential to just below the zero line after turning positive for a brief second during the week. Already pricing in the probability of positive <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK data and a BOE rate hike by the year end, markets will likely see the pickup in volatility come from the US dollar side of things. With deteriorating fundamentals, further downside dollar pessimism will force a potential breakthrough of the aforementioned level.
USDJPY
Japanese yen implied action has remained relatively lackluster, hovering above the extreme level witnessed over the past couple of weeks. The notion presents an ever growing sentiment that activity will imminently pickup given a fundamental catalyst. Leaning towards a breakout notion is the increasingly climbing longer term component, as the differential between measures has thinned to come closer to the zero line in the histogram. Here, a break below the 114 will provide the technical impetus to lift implieds in the short term. However, this does not preclude a move lower as the spot price battles with topside resistance at the 117.00 handle. Event risk in the short term is likely to be placed in the hands of the non-farm payrolls report.
USDCAD
Standing as the lone range bound scenario, the Canadian dollar has remained in the consolidation phase that has loomed over the pair for the past month. Largely responsible for the flatlining pair has been the relatively close interest rate spread between the two as both economies heavily consider a halt in monetary tightening, bucking the general central bank consensus. Separately, the longer term component, although ticking slightly higher, is in a relatively stable range bound depiction as the spread between both longer and short terms narrow to close in on the zero line. As a result, with the 1.1000 technical support floor vastly approaching a break to the downside may spur further indications of heavy activity. Any moves the upside will likely be boosted by US dollar fundamentals while conversely, Canadian dollar movements will likely depend on the days crude prices.
USDCHF
As always, and in similar fashion, Swiss implieds followed the lead of the Euro counterparts ticking slightly higher on the week as the differential continued to narrow towards the zero line. Now with the shorter term component seemingly increasing in strength, event risk later in the week should provide for the probable technical test. With traders concentrated on the US nonfarm payroll report scheduled for Friday, fluctuations and volatility are likely to pickup. Should the report disappoint immensely, look for shorter terms to underpin the move higher on a confirmed lower break of the 1.2200 figure in supporting a breakout scenario.
AUDUSD
The underlying spot price remains consolidating in the Australian dollar as the implied measures have remained relatively unchanged compared to last weeks metrics. Still laying low on the week, Australian dollar implied differentials continue to offer range bound indications. The notion is being reflected in the underlyings tight channel, protected by 0.7700 and 0.7600 handles. Although event risk is still likely to offer some bounces in the volatilities, the overall longer term picture remains lackluster until an otherwise stronger catalyst can be provided.
