Aussie at Two-Month Highs

Risk trades edged higher in US trading on Tuesday but the market was relatively tame with the FOMC decision looming. The euro was the top performer while the yen lagged. Comment from RBA Governor Stevens are the highlight of the upcoming session. For non-Premium members, we attach the direct link to the 3 EURUSD charts helping to make the case for going long EURUSD 90 mins before Fridays release of the NFP, rather than shorting the pair. 1 of 2 trades hit all targets.

The euro climbed above 1.3000 and the Australian touched the highest since mid-September but overall trading was quiet. There was no clear catalyst for the moves.

The US trade deficit in October was at $42.2B, a fraction below estimates but not enough to spark any moves. The Swiss press reported on a rumor that the EUR/CHF peg would be lifted to 1.25 but there was no legitimate backing to the claim.

Periphery borrowing costs eased as the market comes to grips with Italian political uncertainty. Italian 10-year yields fell 10 basis points to 4.72% after hitting 4.90% on Monday. Spanish and Portuguese yields similarly declined.

The latest polls in Japan show the opposition LDP could win 320 seats in the lower house. The two-thirds majority would allow them to push through legislation opposed by the upper house and give Abe a mandate for radical change. The election is Sunday.

The Asia-Pacific calendar features Japanese core machinery orders at 2350 GMT. Expectations are for a 3.0% monthly rise. More focus will be on comments from RBA Governor Stevens at 0430 GMT. There was no hint of further rate cuts following last weeks decision.

The direct link to the 3 EURUSD charts helping to make the case for going long EURUSD 90 mins before Fridays release of the NFP, rather than shorting the pair. http://www.ashraflaidi.com/content/images/p_sub01/ EURUSD%20Pre%20NFP%20Dec%207%202012.JPG_640W.gif Non subscribers can click here to get a free trial http://ashraflaidi.com/products/sub01/

-AB