EUR/CAD
German Data Exudes Optimism: Adding to the Euro major's strength on the session, consumer confidence in the region's largest economy rose better than expected. Looking revived from previous pessimism on the September 18th election uncertainty, confidence for the month of October rose to a reading of 3.4 compared with estimates of a 3.1 print, a five month high. Attributed to the rise were several factors including improving economic conditions and a resolution to the uncertainty that surrounded the Merkel/Schroeder face off. However, now with Angela Merkel replacing Gerhard Schroeder and the Grand Coalitiion formed, expectations still remain over the possibility of much needed revision in current labor and fiscal policies in Germany.
Momentum Shift: Paring back profitable positions, traders flipped previously short lots on yesterday's speculation of rising interest rates in the Canadian economy. As a result, taking into account the euro leg higher and declining oil prices, Canadian weakness mounted on the session.
However, another potential move lower may occur as resurgence on interest rate speculation looks to ensue after the industrial product price report.
Technically Speaking: Bouncing off of the 1.4086 intrasession low, the price broke through all three Fibonacci levels to the upside with considerable conviction. Still feeding off of momentum, the cross looks to meet with resistance at the 1.4250 figure. However, with waning momentum leading to a potential consolidation, retracement remains a possibility. As a result, traders should mind the 1.4203 near term support.
NZD/USD
Rising OCR: In a decision that lifted the currency markets through offshore activity, Reserve Bank of New Zealand Governor Alan Bollard decided to raise the overnight cash rate to 7 percent. Garnering calls of interest overkill, the rate hike came on the heels of rampantly rising inflation. Although potentially containing future price increase pressure, experts are now estimating severe damage to the current rate at which the economy is growing as higher interest rates may curb domestic demand. Nonetheless, traders, loving the carry trade value, boosted the underlying spot. Subsequently, reinforcing the theme was a high interest in an issuance of NZD$350 million eurokiwi bonds overnight.
Technically Speaking: Additionally pushing through all three Fibonacci levels from the intersession move, the Kiwi dollar looks to be pulling back, albeit slightly, against the greenback major. As a result, currently hovering the 38.2 percent fib level at 0.7049, further upside direction may be capped granted the resistance at the day's high of 0.7091 holds. However, most likely, given the consolidation in the price action, the major could see a test of near term support at 0.7049 before upward biased can be expressed.
USD/CHF
Durable Goods Dip Doesn't Bode Well: In the early trading hours, the dollar was steadily losing value against the swissie on bearish sentiment going into the morning's release of US durable goods order data. The report of a 2.1% drop, much sharper than the 1.1% expected by economists, caused a sharp fall which the dollar soon recovered from. Aside from the initial shock, the news wasn't actually that negative. The drop on total new orders for durables goods was actually much smaller than the -5.4% seen in July. In addition, business investment was apparently also fairly resilient with a drop of 1.2% in nondefense capital goods excluding aircraft compared to July's fall of 3.9% in the same category. On top of this, the report also included a sizeable upward revision to August's numbers. The mixed sentiment surrounding this release kept trading pretty much directionless for the rest of the day.
Uncertainty Going Into US GDP: Although the lower-than-expected durable goods number was relatively well received, this may not be the case if tomorrow's US GDP disappoints as well. The GDP growth rate is expected to rise to 3.6% for the third quarter, up from 3.3% the second quarter. However, just looking at the two recent drops in durable goods orders alone, there seems to be considerable downward risk into this expectation for accelerating growth, thereby putting the dollar at risk as well.
Technically Speaking: Continuing on the three session decline, traders reflected bearish sentiment on the dollar to push the Swissie higher on the day. Testing the support at the 1.2700 figure, the underlying spot has begun to consolidate with no directional bias at the moment. Should the 1.2700 figure hold, a retest of the previous support at 1.2795 would be inevitable with a break below leading to a test of 1.2688 (the October 6th spike low.).
Richard Lee is a Currency Strategist at FXCM.
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