NZD/USD
Short Term Boost: Kiwi support built momentum throughout the session as statements released by the Bank of France caught short sellers by surprise. According to this morning's report, French central bankers have decided to sell current gold bullion holdings and use the proceeds to boost high yielding currency positions. Short term carry trade interest additionally bolstered the intrasession move as the economy still boasts the highest interest rate of all the G7 countries, currently at 7 percent.
In Light Dour Data: Traders casted aside disappointing data released the night before in New York, specifically retail sales data for the month of September. Expected to slide 0.5 percent, the figure dipped more than expected by 0.8 percent and were considerably disappointing when compared to the previous month's revised uptick of 0.3 percent. As a result, the figure is suggestive of a near term slowdown in consumer interest as a product of higher interest rates. However, speculation still remains strong of yet another rate hike by Reserve Bank of New Zealand Governor Alan Bollard. Looking further into the quarterly figure which exclude inflationary measures, the retail figure rose a solid 1.3 percent as third quarter sales rose 7.4 percent compared to last year's figures. As a result, even with the governor citing the current spot price "unsustainably high", traders are expecting another 25 basis point rate hike to 7.25 percent on December 8th.
Technically Speaking: Bouncing off of trendline support, the major currency has risen through the 0.6800 figure, penetrating the 23.6 percent fib at 0.6821.
Next stop looks to be the 38.2 percent fib ceiling as previous consolidation lends to a formidable test at that level. Subsequent floors exist at the bottomside trendline should the current momentum fail.
AUD/JPY
Carry Traders Ho!: Cutting through fibs like a knife through butter, Aussie interest soared as traders bid the cross currency to an intrasession high of 87.30. Already garnering 550 basis points on the general spread, traders are looking ahead to the upcoming wage price index report in offering suggestions that the spread may widen to 575 basis points when central bankers next convene.
The Setting Sun: Positive economic sentiment seems to be sinking in the land of the rising sun as both leading economic and coincident indexes posted lower results compared to earlier prints that reflected better times. The leading economic index for September sank to a 45.5 percent read, compared with a higher 50 percent read, suggesting contraction in the near term future. In addition, the coincident index dipped to a 50 percent figure from 55.6 percent. Although still above the expansionary 50 percent level, the decline suggests the current state of the economy may actually be slightly bearish at the moment.
Technically Speaking: Successfully pushing through the topside trendline, momentum may be slightly thinning following the enormous intraday bull wave. As a result, retracements should follow to the 23.6 percent fib at 86.89 before further carry trade momentum looks to infiltrate, but not before testing the previous resistance. Downside moves look to be capped at the 38.2 percent fib at 86.68.
AUD/USD
Short Covering Culprit: Traders pared back short positions in the underlying major currency following statements of bid interest from the Bank of France. Coupled with squeeze potential, the Aussie made an about face and turned on the 0.7260 figure. Additionally mentioned in rumored bidding was a formidable Australian buyer that kept the pair afloat, buying a considerable amount towards the bottom of the previous downtrend.
Australian Labor Inflation: The move frontruns a release of the Australian labour prices report, due out tonight at 12:30 GMT. An important indication of underlying inflation, traders will be scrutinizing the figure and any subsequent suggestions that interest rates will have to rise in the economy. Still remaining at 5.5 percent, expectations are mounting for Reserve Bank of Australia Governor McFarlane to boost the overnight cash rate in line with their New Zealand trade partner. Although inflationary pressures are a concern, experts have noted that the strong economy shows signs of plateauing and a potential decline heading into the new year.
Technically Speaking: Finding a pinpoint bottom at 0.7260, the Australian dollar has penetrated the first three fib levels with ease, finding considerable resistance at the 61.8 percent fib at 0.7338. Hovering below the previous ceiling, set by the spike high overnight, price action looks to remain thin going into the Asian session. As a result, retracements and consolidation look probable before further moves higher can occur.
Richard Lee is a Currency Strategist at FXCM.
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