NZD/USD

Fundamental Take: Dropping earlier in the session on an upbeat U.S. trade balance, Kiwi interest has been rebuilt going into the Asian segment in spite of a downside report on the manufacturing sector of the economy.  Although new orders maintained their levels compared to previous readings, dips were seen in employment components.  Contributing overall to the decline to 52.3, the dip in employment contributes to nascent speculation on pessimistic future prospects in the New Zealand economy.  Subsequently, price action is also reacting to announcements of a press conference being held with Reserve Bank of New Zealand Governor Alan Bollard.

Greenback Strength: Expected to widen to $59.5 billion, the U.S. trade gap ballooned less than expected by $59 billion.  This places the August gap as the third largest on record as higher oil imports contributed substantively to the overall higher figure.  Subsequently, the trade deficit with China rose once again to a new record of $17.7 billion.

Technically Speaking: Bouncing off of the underlying support for the past week, the spot price looks to rise as it breaks through the 78.6 percent fib from the three day bear wave.  Next stop for Kiwi bulls looks to be the 61.8 percent fib at 0.6936 with a subsequent test at 0.6951.

EUR/CAD

Euro-zone Disappointment: Although several reports were released during the session, traders decided to focus on the gross domestic product figures for the second quarter.  Anticipated to rise 1.1 percent on the yearly comparison, economists may have been expecting a slightly higher figure as recent economic data has been relatively optimistic.  As a result, even in line with earlier estimates, the data was received poorly as it douses previous speculation on forthcoming interest rate hike considerations.

Surplus Narrows: Printing another monthly surplus, the merchandise trade balance for the world's eighth largest economy narrowed slightly in August. Expected to widen to C$6 billion, the actual figure was slightly lower at C$5.6 billion, additionally below the C$5.8 billion seen last month.
Subsequently, Statistics Canada revised the previous figure lower to C$4.9 billion.  With a slower rising surplus, central bankers may be slightly hesitant to raise rates when they next convene next week.

Technically Speaking: Already looking to retrace, the currency cross looks to test the 38.2 percent fib after bouncing off of support at the 1.4023 level.  Based on the chart, a break through the 1.4193 level would see a test of the 1.4127 floor (50 percent fib from the three day bear wave).  Any breaks below would surely see further downside pressure in the intermediate term.

USD/CAD

Oil Declines On The Day: Crude oil contracts on the New York Mercantile Exchange dipped on the day in light of recently increasing speculation over supply concerns on this upcoming winter season.  According to the EIA weekly inventory report, U.S. stockpiles actually climbed for the first week in seven, lending to the notion that current supplies remain lofty.  Nonetheless, despite the EIA report, overall sentiment may be siding with earlier comments by the IEA on Wednesday and further supply concerns going into 2006.

Interest Rate Concerns: As a result of today's lower than expected merchandise trade balance, traders pared back loonie positions on speculation that policy makers will be hesitant when they convene next week.  With anticipation of another 25 basis point hike, coupled with rising prices of crude, the Canadian dollar has become favored over the greenback with most of the U.S. interest rate hikes already said to be priced in.  However with recently tepid data, excluding the positive housing starts figures, sentiment may be shifting to a pause rather than a guaranteed rise in short term rates.

Technically Speaking: Hitting resistance at the 1.1850 ceiling, the short burst experienced by the cross may very well be short lived.  As a result, the first considerable test looks to be the 1.1759 figure (38.2 percent fib from the weekly move).  Any break below may see a test of the 61.8 percent fib rather than a considerable contest at the 50. 

Richard Lee is a Currency Strategist at FXCM.