By DailyFX - AUDUSD.On The Eve Of RBA Traders bid the currency higher on the eve of the Reserve Bank of Australia's overnight cash rate...

... decision.

Although mostly anticipated
to keep rates unchanged, market participants remain upbeat of the carry
trade opportunity. Given today's mixed greenback data, individuals
still remain steadfast in their interest to earn the rate differential
between dollar and Aussie dollar denominated assets. Currently the
spread is 150 basis points wide. Moreover, anticipation looms over the
next scheduled release of the region's gross domestic product.
Although expected to slow on the monthly figure, the Australian economy
is estimated to grow at healthy pace of 2.7 percent I the third
quarter.

Greenback Bears
Leading to greenback bearishness, today's economic data remained
mixed. Although productivity was bolstered in the in the final figure
for the third quarter, unit labor costs were to the downside.
Suggestive of lower inflationary pressures, the labor cost data lends to
earlier speculation that current monetary tightening policy in the U.S.
could be on its way out, leaving benchmark rates slightly above 4
percent.

Technically Speaking
Continuing the upward trend that has been witnessed over the past week,
the Aussie major currency continued to rise further testing the
intrasession high of 0.7546. Currently consolidating just slightly
below, the currency looks ripe for a temporary retracement to 0.7491
(23.6 percent fib level from the recent bull wave). However, the
previous option barrier at 0.7550 and psychological round floor at
0.7500 look to pose minor barriers before the aforementioned downward
test. Upside potential, nonetheless, remains given a break of the
high.

AUDJPY

Traders Capitalize On Differentials
Carry traders took further advantage of the rate differential available
in the currency cross as current sentiment continues to bolster a zero
interest rate policy in the Japanese economy. The move comes in light
of positive regional economic data in the land of the rising sun. In
the overnight session, overall household spending remained buoyed for
the second month in three, rising 2 percent on an annualized basis. On
the monthly comparison, the figure declined 0.1 percent, however was
comparably positive against expectations of a 0.2 percent decline.
Definitively confirming a turnaround in the domestic economy, the figure
further boosts the possibility of a turn around in currently loose
monetary policy as the economy is now set to expand at a near 2 percent
rate. However, given recent comments by both Bank of Japan officials
and government heads, without a positive sign of deflationary
dissipation current zero interest rate policy looks to remain well into
2006. Further placing unwanted bearishness on the region's currency,
traders are embracing momentum from yesterday's comments by policy
officials on the acceptance and flexibility of current yen levels.

Technically Speaking
Additionally rising further, the AUDJPY cross continues to consolidate
ahead of the Asian hours. Retracing slightly, further downside momentum
looks to infiltrate with a floor test of previous consolidation looming
over 90.50. A break below would see probable capping at 90.40. Upside
potential exists with a break of the intrasession high of 91.40.

AUDCAD

Dovish Followup
Canadian bulls peaked earlier on only to exit center stage following
slightly more dovish comments by Bank of Canada officials. With central
bankers citing that inflationary pressures seem to have abated slightly,
traders pared back positions as it became clear that the current
tightening policy might be placed on temporary hiatus in the near term.
Although the current Canadian rate, now at 3.5 percent, nearly rivals
that of its major current counter the greenback, it still lags behind
the current overnight cash rate available in the Canadian economy
offering higher rates of return. As a result, traders continued to bid
the cross higher. Separately, incremental downside in crude contracts
and other energy commodities was reflected in the bloc representative.

Still Further Strength
Nonetheless, other aspects of the Canadian economy are forging ahead.
According to Statistics Canada, building permits rebounded from last
month's dip, rising 1.2 percent against an expected month of unchanged
figures. Additionally, manufacturing activity rose to print an
expansive 65.8 versus estimates of a 61 print. As a result, although
inflation remains restrained at the moment, current economic data may
bolster further hike considerations if the recent trend continues.

Technically Speaking
Keeping in a steady range, the cross is currently at an apex. Finding
a test of a near term upside trendline, price action looks imminently
retraceable. First floors are present at 0.8685 (23.6 percent fib level
from the weekly bull wave) with strong capping potential at 0.8661.
Comparably, upside potential remains till the 0.8750 ceiling.


By DailyFX