AUDJPY
Aussie traders pared back positions in the AUDJPY currency cross for the second consecutive session following comments by Reserve Bank of Australia Governor Ian McFarlane. However, sparking off the initial selling sentiment in the overnight was the Peoples Bank of Chinas decision to raise the countrys benchmark interest rate once again. The central bank decided to lift the one-year deposit rate by 27 basis points to 6.12 percent, which will be effective at the end of the month in order to further curb foreign investment in the country. A suggestion of further concern over the exploding growth seen in recent months, the announcement lifted the Japanese yen leg of the cross as regional currencies additionally benefit from such positive developments. The news subsequently furthers profit taking sentiment against the short term move higher witnessed earlier in the week and coincides with specified technical levels. Additional momentum is likely to ensue given positive estimated data in the worlds second largest economy expected for next week.
Technically speaking, the currency pair finished a textbook double top formation where sellers emerged in the 89-89.50 area, capping the bull wave seen over the past couple o months. Now testing support at the 87.50 figure, bears look to make a run on the 87.00 level should the session close, completing a break below the floor heading into the weekend. Should selling opportunities emerge, 86.40 (50 percent fib from the June 06 August 06 bull wave) seems the likely cap in the move. Upside momentum is possible, however, capping is likely at a test of the 89 handle.
GBPJPY
The sterling remained under selling pressure in the GBPJPY currency cross as the weeks poor data results continued to hang over the major. Additionally fueling downside in the major seems to a rumored barrier option at the 1.8750 figure, pulling down crosses in the near term as well. However, underpinning some support in the pair seems to be word of a 10 billion pound purchase by Saudi Arabia. The purchase, which includes fighter jets from the UK, is likely to be completed in the short term where near term dated payments are expected to come as early as next week. The payment is likely to boost some demand for the currency as participants are sure to use current exchange rates. Subsequently, the Japanese yen leg is being supported by trickle over bidding following comments by the Peoples Bank of China to raise rates. As a result, buyers are looking to take advantage in the pairs as the major continues to consolidate in thin summer nature.
Finding the 220.50 figure too difficult to bypass, bulls are continuing to take profits as the GBPJPY cross meets a short term test of the 218.00 figure. Already breaking lower heading into the weekend, the shorting sentiment looks to persist in the near term, formulating a move to the 216.36 (38.2 percent fib level from the July 06 August 06 bull wave) figure. A break below that should see easy barriers at the 215.06 with the 213.75 providing ample defenses against the bears. Upside potential remains thin as stops are eyed above the 220 handle.
AUDUSD
The Aussie major rounds out our three market movers on the day, falling 0.4 percent in New York. Sparked by further AUDNZD liquidation, the AUDUSD currency pairs dip was sparked in the overnight by comments from Reserve Bank of Australia Governor Ian McFarlane. In statements to the House of Representatives Economics Committee in Sydney, the Reserve Bank of Australia governor admitted to the need for further rate hikes as inflationary pressures continue to haunt the economy. However, traders took to the caution suggested by McFarlane, that excessive rate hikes need to be avoided. A potential suggestion to an interim tightening halt, the statement sparked concern that the widely expected 25 basis point rate increase may be pushed back till the first quarter of next year as economic data warrants it.
Option barriers additionally contributed to the days downward trend as traders continue to note the 0.7700 level FX option as minimizing any upside potential in the currency pair. Further barriers seen above are adding to the level with barriers at 0.7750 and 0.7775. Both are expected to mature in September, keeping a near term climb in check for the most part. Heading into the close preceding the weekend, bidding can be expected on the session low as profit taking is imminent.
