• AUD/NZD 0.9%
• EUR/CAD -0.8%
• NZD/USD -1%

AUD/NZD

Better Prospects Across Shift Traders: Following news of unfavorable uridashi holdings, traders shifted gears and transferred capital to better prospects across borders.  With growth plateauing in the Kiwi economy and a preferred depreciated currency bias from policy makers, traders opted for Aussie optimism as reflected in yesterday's Westpac report.  Although rates are not expected to rise above 5.5 percent in the near term, prospects remain favorable as hints of expansion continue to bolster Australian dollar favoritism.  Carry trades still a preferred vehicle, the underlying looks to be underpinned in the near term.

Technically Speaking: Rising to the occasion, the AUDNZD currency cross continued off of the lower trend channel line from the longer term bull wave sparked on December 6th.  Mild consolidation preceded the move, bolstered by a support floor at 1.0772 which coincided with the 50% fib from the December 12th ââ,¬â€œ January 6th bull wave.  Currently consolidating, price action looks ripe for a dip through support at 1.0987 with barriers at 1.0965 (confluence of the 23.6 percent fib from the intraday move and 20-hour moving average) and 1.0929 (38.2 percent fib from the same move) to the downside.  However, the decline would be likely be capped at 1.0900, site of previous consolidation.  Subsequently, with longer term bias to the upside, bulls may look to eye the intraday high at 1.1024 as the first ceiling before attempting 1.1042.

Rumorville: Heavy offers looked capped at 1.1045 with stops on bids seen at just above 1.1030.  Should price action break lower through the current floor, bids looks to be coming in at 1.0850 and 1.0925.

EUR/CAD

Foreigners Prefer Canadian Fixed Income: With consumer inflation suggestively tamed in the Euro zone region, traders preferred the loonie denominated major on a larger than expected transactions figure.  Expected to rise C$3 billion in the month, net foreign investments vaulted 80 percent past estimates to rise C$5.5 billion.  Notably, fixed income favoritism was blatantly visible as equity preferences dipped on the month.  Coupled with continued bidding on crude commodity markets, the major looks set for further upside bias that should be reflected in crosses across the board.  Adding to angst looks to be next week's electoral results and the Bank of Canada's anticipated rate decision.  Already pricing in a 25 basis point rate hike for the fourth time, questions remain over the continuance of the series heading into coming months as inflation remains tepid.

Technically Speaking: Finally finding a bottom, EUR bears look to be consolidating after pounding the cross lower through multiple support floors throughout the day.  Although a retracement remains theoretical, further downside looks imminent with a failure of support at 1.4070.  Next in line for bears looks to be near term support at 1.4040 (area of previous consolidation and 100-hour moving average).  Considered formidably strong, 1.4000 would be the inevitable consideration should the 1.4040 support floor break as we approach bottomside at 1.3961.  Comparatively, short term bulls pushes may find considerable barriers at 1.4092 (100-hour moving average) and 1.4102 (50% fib from the aforementioned bull wave).

Rumorville: Heavy bidders remain under current support at 1.4020/25 with heavier bids looking to initiate at 1.13967.  Comparatively, with lighter offers above at 1.4105, heavier sellers convey interest at 1.4255, today's session high.

NZD/USD

Uridashi Talk Leads Kiwi Lower: Offering the sharpest fall in a month, the Kiwi underlying took a major hit as the economy's government released current intentions on informing major market participants and Japanese officials of the increasing risk of investments in Kiwi dollar denominated bonds.  In accordance with Japanese demand, uridashi issuance, which rose to a total of NZ$13.1 billion in 2005, may face a shortfall as investors weigh the effects of a lower currency upon coupon redemption.  The move looks to be widely implemented as policy makers attempt to lower the region's currency, attempting to be beneficial for the Kiwi economy.  With retail sales data later this evening expected to be to the downside, coupled with lower inflationary figures earlier in the week, bearish notions look to remain in the near term as the currency presses towards 0.6700.

Technically Speaking: Currently consolidating above the 0.6761 intraday low, the Kiwi dollar is offering temporary upside bias through a break of both 10 and 20-hour moving averages and an exploding golden cross in Stochastic.  Initial upside retracement looks to be hampered by the 23.6 percent fib of the recent bear wave at 0.6817 and a confluent resistance at 0.6824 (50-hour moving average and area of previous consolidation).  Combined with a downward trendline, bullish pushes may ultimately run thin at this level leading to further downside as overall bearishness looms in the longer term.  Sparked by a piercing line, the daily view offers much more room to drop as bears attempt the 0.6700 figure.

Rumorville: Heavy bidding at 0.6765 looks to be propping the underlying major as further considerations reside below at 0.6712/14, capping downside momentum.  Even lower, a rumored option barrier at 0.6700 figures a good point for bulls to regain momentum.  On the downside, offers continue to mount at the 0.6850 while even heavier considerations reside at 0.6950, the 100-day moving average.

Richard Lee is a Currency Strategist at FXCM.