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Currencies: The dollar continued to fall victim to rising risk appetite as various region of the world continued to present better economic data. Global equity markets were responding well to the overall effects of various data releases from around the globe and respective central bank comments. The reserve currency issue…

EUR/USD traded higher this morning in line with the better tone of stocks markets. Reports that Dubai is negotiating to restructure $26 mln of debt has lessened the risk of default and strong print from Chinese manufacturing PMI data has combined to support the risk trade.

Dollar/Yen experienced further descending on Monday, reaching depths of 85.89, where further bearish momentum was limited, closing the day at 86.34, and sharply turning upwards this morning, reaching the 87.53 peak. Besides the convergence formed, which gave good increasing signal, the news for the Japanese government market intervention to weaken…

After an as expected rate decision moving the cash rate from 3.5% to 3.75% the AUD moved lower against the USD. The accompanying RBA meeting minutes suggested that inflation was contained and has declined off its peak and that a higher AUD will continue to hurt trade. On the daily chart below we see the pair has broken the long-term trendline we have been following and is now using it as resistance. The second chart is a shorter-term version of the daily.

Markets are clearly in a lull, as the lack of drivers and low liquidity has kept the majors rangebound. The EURUSD traded between 1.4980 and 1.5040, while the USDJPY traded between 86.20 and 87.50. Gold was stable for most of Asia and then saw some strong demand, as Europe opened…

The RBA has raised their cash rate from 3.50% to 3.75%. The market had a muted reaction to the release with the AUD trading lower against the USD. The RBA meeting minutes are as follows:

• Financial markets have improved considerably.
• Recovery is much quicker in China and the rest of Asia.
• Australian economy is in a gradual recovery.
• The rate rise is to keep inflation consistent with target.
• The board moved at recent meetings to cut stimulus.
• Public infrastructure spending is supporting demand.
• 2010 growth is in line to trend.
• There are early signs of recovery in the labor market.
• Inflation is likely to be close to its target.
• Jobless rate is to peak at a lower level than expected.
• Outlook remains similar to November statement.
• Inflation rate has declined from peak.
• Household wealth has had noticeable recovery.
• Sees moderation of inflation in near term.
• Housing credit is expanding at a solid pace.
• Sees inflation consistent with 2010 target.
• House prices have risen significantly this year.
• Rise in interest rate will have an impact on containing prices.
• The AUD rise will damp trade sector.

Despite the improvement signaled recently in the euro zone, especially in the third quarter, the economy is still suffering from some problems resulting from the recession such as the escalating unemployment rate which is threatening recovery and raising concerns.

EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated above the 50- and 200-Day SMA, currently projected at 1.4793 and 1.3523.

Following speculations from investors whether the Japanese Government will intervene in Yen?s evolution, the Bank of Japan issued a statement declaring will introduce a new operation to provide funds for three months at a fixed interest rate of 0.1 percent. The plan is aimed to bring down longer term rates…