By DailyFX - EURAUD - Who Is Piloting Germany?
Germany's Chancellor Gerhard Schroeder and Christian Democrat leader...

... Angela Merkel
announced that they have reached a breakthrough in their negotiations to make a
coalition government. The government has been held up in a stalemate since the
election results left both candidates splitting an equal share of the vote. Social
Democratic Party chairman Franz Muentefering said in a statement that they no longer
need "exploratory talks" and their "ability to form a coalition is a fact." This
just leaves the sticky situation of who should be the chancellor of the first
coalition between these two parties since 1969. This will not be an easy task as
both groups have blatant policy differences. Some of the most polar issues between
the two comes with the direction of the economy. Depending on who takes the helm,
the German economy could be steered out of unemployment near record levels and
growth that has been less than impressive.

Technically Speaking
A falling trend line that has contained price action the upside for the past month
was broken with today's range busting day. The pair has eased significantly from
the 38.2% fib that resides at 1.5920, but with little standing in way until then,
the level could be easily reached. If euro bids take the pair through this level, a
run would likely peter out around the 50.0% fib at 1.6019. To the downside the
former support at 1.5755 formed by the low of the 20th and the further down the
three-month low at 1.5600 would kill out any aussie optimism.



EURCAD

Making A Return Appearance
Making its way onto the market movers list for the second day in a row, EURCAD has
changed pace from gaining on no data, to a fundamentally heavy day. While Canada
had no scheduled economic release, the Euro took control with better than expected
PMI services and retail trade numbers for the month of September and August
respectively. European service industries grew at their fastest pace in over a year
to 53.5, while retail sales returned to positive territory with a 0.9 percent rise.
With both of these indicators fresh on monetary officials' minds going into
tomorrow's ECB rate decision, there exists a good likelihood that their language
could harden to make the possibility of a rate hike more near-term.

Oil Wearing Down
Further fueling bids for the pair on through the day was crude's fourth day of lower
prices. Light sweet crude futures fell to $63.33 intraday on the New York
Mercantile Exchange. The precious commodity has been one of the key factors in
keeping the Canadian economy expansionary over a period of weak domestic demand by
fueling exports that would have otherwise have been degraded by an appreciating
currency.

Technically Speaking
Today's 1.3 percent move blew the pair through the trend channel that has kept
movement contained for over a month. The break has stalled at 1.4210, a resistance
level formed with the highs of September 26 & 28. If this level fails in Euro
session momentum, the 38.2% fib of the monthly swing would act as another brake for
the pair. If resistance holds, 1.4000 would be the best level for serious testing,
with minor support a little higher at 1.4065.



AUDJPY

Reserve Steady Ahead
A delayed reaction to the RBA's decision to keep the overnight lending rate
unchanged at 5.50% for the seventh consecutive month, drug the pair down when the
euro session offered deeper liquidity. MacFarlane and his board were presented with
consumer confidence at a two-year low, falling exports and building approvals that
are at their worst since 2001. This equates to weakness in both the domestic and
export sectors, leaving little else to stoke growth. The only positive factors that
present themselves at the moment are business investment and mining, both of which
could be suspect as energy prices continue to weigh on company revenues.

Technically Speaking
Aussie bulls were not confident enough to keep the pair pushing further into
seven-year highs. The initial momentum with the drop carried the pair through the
23.6% fib at 86.25, but the even 86 level has proven to be a more efficient net for
the pair. The former resistance level has now shifted to a stable support. Looking
farther down, the 38.2% fib at 85.57 will take the wind out of a continuation of yen
strength, while a move in Aussie's favor only sees yesterday's high at 83.73 as the
only level with testing.


By DailyFX