EUR/JPY
Manufacturing Upticks: Bolstering euro bidding in the near term, fundamental reports showed a revitalization of the region's services sector. According to the Purchasing Manager's index by RBS/NTC, services grew the most in 16 months in November. Coupled with the upbeat manufacturing sector figures, the region's economic expansion may in fact top the third quarter's performance of 0.6 percent. The composite report printed a 55.2 compared with earlier estimates of 54.7. This reading now lends some strength to Euro Bulls as it shows that the latest decision by European Central bankers may not be as unwarranted as some suggested. However, although carry traders continued to bid the cross higher in the day, the rather conflicting retail sales data may hint otherwise going into the Asian session. Mostly in line with the monthly comparison, rising 0.5 percent, the annualized sales figure dips to 0.4 percent, considerably lower than the 1 percent expected. Ultimately, this may spark some concern that domestic demand remains rather weak compared to the upticks in manufacturing as exports seemed to have bounced slightly. Separately, China's enormous Airbus order of 150 jets, worth over $9 billion, sparked earlier sentiment higher as parties will need physical conversin on payment.
Technically Speaking: Penetrating through the upside trendline, the cross looks to finally be taken over by short term weakness. Hitting a high of 141.28, the currency has created a pinpoint turn with an imminent test at the next floor of 142.22 (the 23.6 percent fib level form the session's move). The level should hold temporarily with definitive capping at 141.93 (the 38.2 percent fib), where previous consolidation occurred. Probable upside will see a break of the intraday high.
NZD/USD
Awaiting the RBNZ: Economic data was thin, providing little to spark such a momentous move to the upside in the major currency as price action broke through 0.7150 and tested the 0.7200 handle. As a result, today's action makes one entertain the idea of major bidding by individuals before the Reserve Bank of New Zealand's overnight cash rate decision in two days time. Hiking once again by another 25 basis points, central bank Governor Alan Bollard looks to curb inflationary pressures which are expected to soar above the 3 percent benchmark target. The higher rate would effectively attract further carry trade speculation as it would increase the carry spread, difference between economies, to 325 basis points. Kiwi bullish, momentum may push the currency higher against the U.S. major in the near term, however, may reverse recent strength if the decision is otherwise stated.
Technically Speaking: The strong, nearly 3-week long kiwi rally is beginning to show signs of indecision around 0.7200. After price action today took out a 61.8 fib of the dollar's move against the kiwi between March and July, the repeat support and resistance level at 0.7195 finally sobered bulls. If bulls rally momentum for a push beyond this level, the next nearest level for resistance lies with the 73.6 fib of the same dollar run at 0.7265. If however, bears take this oppurtunity to make their move, real kiwi bidding will not be present until 0.7215/20 where the confluence of the lower bound of a rising trend channel and former resitance on the daily chart meet.
CHF/JPY
Carry Traders Bolster Move: Carry trade momentum yet again as no pertinent economic data for both economies was released during the session. Captial spending lent optimism in favor of the Japanese yen, which was unreflective in the price action. Japanese firms increased their spending by 10.6 percent in the third quarter. Soaring above the 6 percent expected, the rise is suggestive of better outlooks by domestic firms as they beefed up investments internally leading to bullish sentiment on yen denominated assets. The Nikkei 225 soared past the 15,000 figure to close at 15,543 I nTokyo. However, comments by Finance Minister Tanigaki and Bank of Japan Governor Fukui was the tour de force in pushing the USDJPY major closer to 122. Commenting to reporters over the weekend Fukui stated that the recently weaker yen "is not a problem" with Tanigaki stating that the recent slide in the yen is reflective of current economic performance. As a result, already falling 15 percent against the dollar, the underlying spot price may have further to fall given the these recent bearish comments along with no indication of government concern or intervention efforts.
Technically Speaking: An ascending triangle in the CHFJPY pair that has been five years in the making may have finally broken. Former resistance at 92.20 set back in May of 2003, was breached in today's strong swissie bidding, which has left price action floating at levels not seen since October of 1998. The next true level of resitance comes in at 94.20 with the 61.8 fib of yen move from late 1990 to late 2000. However, caution should be held to ensure the break is legit. If the pair closes back below 92.20, the break would be rendered invalid and a subsequent move to 91.50/5 could be in order.
Richard Lee is a Currency Strategist at FXCM.
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