We are going to look today at the currencies and we're going to look at three crosses starting with the Aussie/yen and going into the Canadian/yen and the New Zealand dollar versus the yen. The reason I want to look at these is that they are all commodity currencies. Anybody who has picked up the newspaper or business newspaper over the last 12 months has known that commodity currencies are doing very well. They're doing very well against the US dollar. However, they're not doing that great against the Japanese yen.

Interestingly, a lot of you who watch the news, or watch at the mainstream business channels, whenever the stock market goes down, there is always talk about the dollar going up, the dollar going down. But almost every time it is the yen actually exceeds, or outperforms the US dollar when there is risk aversion when stocks go down. So let's just go deeper into this. (We're not going to take you to dollar/yen.)

Now the Australian dollar year-to-date is the best performing currency when compared to the top 11 traded currencies. It's actually even the highest performing currency in the last six months, meaning from May until now. But what it's doing against the yen, look at this. This is a daily chart. This is a very basic chart but a very important chart. You have a case of lower highs. You've got a high here end of October here around 85 and then you've got a high here around 83.90. So we went up, we came down, we tried to recover.

Now, what is interesting here, not only the price chart has a case of lower highs, but the Stochastics. I look at the slow Stochastics which is less prone to the fluctuations of the market, less prone to noise. Stochastics, which is an oscillator, which is the way really to look at the momentum here, is also having a case of lower highs. What does that mean? That means that a currency, a higher yielding currency such as the Australian dollar, a currency whose central bank is very much expected to raise interest rates for the third time this time (that's a feat that no country has done in this recession time), is actually not able to do so well against the yen.

So basically, this is one of the ways to underline the bullishness for the Japanese currency. Basically when you look at this you say if the Japanese currency is doing so well against this big kahuna of the currencies the Australian dollar, then what would it do against other currencies? So this is really the reasoning.

So basically, people are looking at this and they could say that well this means that any emerging recovery in the Australian dollar versus the yen is expected to be quite limited and we could be definitely going towards the 80 level around here. If there is going to be any signs of any retreat in equities, if you looked at our show yesterday where the Nikkei was coming down, if the Dow was unable to break above that 10,000 at 335, if the S&P comes down more, if oil falls back towards $76, $75, case of risk aversion, inter-market analysis tells you that this is likely to come back down again towards the 79 level.

Very quickly, we're just going to go to the same idea - the New Zealand dollar versus the yen. Again, a case of lower highs. The Stochastics are also lower highs. We went up here. We tried to come up. We failed. Look at this. This is a clear sign of consolidation. Inability, in simple English, for the market to really to break, indecision followed by decline, a big decline. We may have the same thing here. But if we rebound, we're unlikely to go above 66.

Last but not least, the Canadian/yen. A case of lower highs here in the price and lower highs in the Stochastics. Basically, for those of us, and I guess every one of us who is following oil, oil has been unable to break above the $81 level. We're not even talking about the $82 level, the one that was reached around October 15. Looking at the $80.50 level, it has been unable to break above that and as oil has been unable to break above that, a very nice direct positive correlation between Canadian/yen and oil. As oil has been unable to go up and there is a case of lower highs, this is the same story right here. We've been unable to break above 86. Now we're testing around 84. We could very well be looking around 82 and even 81. Again, as risk aversion emerges, as stocks come down, this is likely to come back down again. For those who cannot trade Canadian/yen with their FX brokerage, they can actually engage into trades, or basically they can buy dollar versus Canada and they can sell the Canadian and they can sell dollar versus the yen. So this is one of the ways to do it.

This is it from me for today, Ashraf Laidi, for this edition of Cantos Charts.