The JPY and the EUR have been the main movers overnight. Â We will start with USD/JPY. Â The Japanese Yen was sold off after the Japanese cabinet approves a JPY 880 billion stimulus package, which was more than double the package that was announced in October.
This package includes funding for nursing homes, jobs and small business financing. Â It also is hoped to cover projects that were undertaken following the natural disaster in 2011. Â Add this news to the continued expectation of the BOJ easing at their meeting later this month and the result is USD/JPY above 82.50.
A report in a Japanese newspaper shows the opposition LDP with an approval rating of 23%. much better than the ruling DPJ’s rating of 13%, which pretty much assures the election of LDP leader Shinzo Abe as the next prime minister when elections are held on December 16, just a few days before the next BOJ meeting.  Yesterday Abe reiterated his call for all measures to be taken, including adding more stimulus until inflation reaches 2%.  The elections on December 16 will be for the lower house of parliament, who then determines who will become the next prime minister.
The EUR rose to an overnight high of 1.3027 as the markets expect the German parliament to vote in favor of ratification of the amended aid plan for Greece.  The initial move higher was tempered by comments made by ECB President Draghi who stated that the crisis is not over yet.  He also said he expects Eurozone recovery to occur in the second half of 2013, and that the agreement reached by EU finance ministers this week shows that Greece will remain a part of the EUR.  He reiterated, “the ECB will do whatever it takes to keep the EUR stable.  On the back of these statements, German Finance Minister Weidmann said that “the central banks have done enough to stop the Greek debt crisis.  It is now up to the governments to tackle the causes of the crisisâ€.  It looks like once again, the markets are not convinced yet that the EUR should trade higher.  Resistance at 1.3030 was barely missed and the single currency has once again fallen below the 1.3000 level as we approach 5 am.  It appears any move higher will be a grinding one.  Overnight support was at 1.2995, so the currency has traded in a tight range and it looks like the North American market will determine direction when the begin trading a few hours from now.
Negotiations on the fiscal cliff in the US are beginning to take on an edgier tone.  After meeting with Treasury Secretary Geithner yesterday, House Speaker Boehner was less than optimistic that an agreement would be reached by Christmas.  He is calling for the Democrat to “to get serious†about spending cuts, after the lack of serious progress over the last two weeks.  Senate Majority Leader Reid countered by calling for a “serious offer†from the Republicans.  The clock is ticking as we approach the new year and at present, there doesn’t seem to be any agreement on the horizon.
AUD and CAD remain bid as traders appear comfortable adding risk trades on these currencies.
Next week will see five central banks meet to determine their policies. Â The Reserve Bank of Australia meets on December 3, the Bank of Canada on December 4, the Reserve Bank of New Zealand on December 5, and the Bank of England and European Central Bank of December 6. While none of these banks are expected to move interest rates, the comments made post meeting will be closely watched to see how policies be determined as we approach 2013.
ECB President Draghi continues to make comments as the EUR orbits the 1.3000 level. Â There will be continued comments from Capital Hill on the fiscal cliff. Â The EUR levels have been determined. Â A break above 1.3030, sets a target for the 1.3060 area. Â A strong weekly close would help get the EUR to that level early next week. Â A break below 1.2990 support would see the EUR move back towards 1.2970.
Further reading:
- EUR/USD May Extend Rally To 1.3100 (Elliott Wave Analysis)
- Forex Analysis: USD/JPY Rises after Pull Back
