• NZD/USD +0.8%
• EUR/CAD +0.6%
• EUR/JPY +0.7%

NZD/USD

Carry Traders Resurface: Kiwi traders took advantage of todayââ,¬â"¢s mixed greenback data in reinitiating long positions in the market.  With the interest rate differential still relatively wide between the two economies, investors clamoring for higher rates of return remained vigilant of entry opportunities and edged their way into the arena.  Besides the carry trade interests there was very little in the regards of economic data to spark any further speculation as we head into the end of the week.  Looking forward in the near term, setting aside the staid visitor arrivals report, volume looks to thin ahead of the U.S. employment report.  Should the report be released higher, speculation looks to continue in favor of further rate hike considerations by the Federal Reserve.  Subsequently, with todayââ,¬â"¢s labor costs figure rising to 3.5 percent, futures traders have already priced in a 120 percent chance of seeing 4.75 percent by mid-2006.

Rumorville: Mixed stops and offers reside around 0.6910/15 with tight stops above at 0.6920.  However, bidding continues to provide for further upside in the currency as bulls continue to take advantage of dips and retracements.  Bids are located at 0.6855 and even lower below at 0.6835.

EUR/CAD

ECB Confirms Market Sentiment: Euro interest was sparked in the major underlying and its crosses as European Central Bank President Jean Claude Trichet signaled further rate hikes would be forthcoming following todayââ,¬â"¢s decision.  Citing additional inflationary pressures and impending regional growth, Trichet confirmed earlier market sentiment that rates would move as soon as March by 25 basis points to 2.5 percent.  Futures traders are now pricing in a highly probable 2.75 percent by mid-2006 with some estimating a 3 percent benchmark rate by yearââ,¬â"¢s end.  As a result, in an interest rate favored environment, the single currency rose against the Canadian dollar with most speculating that  the rate differential is surely to narrow.  Also placing bearish pressure on the Canadian leg of the synthetic, crude oil contracts traded lower throughout the day.  Dipping below the $66 a barrel level, contracts have declined on lessened concerns over the Iranian situation and a better than expected stockpiles report released yesterday. 

Rumorville: Bids on the EURUSD major at 1.2080/90 and lower at 1.2050 and 1.2025 should keep the single currency bid higher underpinning cross strength.  Subsequent stops are mixed in at 2030 with larger stops below protecting the 1.2000 figure.  Leading to CAD weakness is a spate of offers at 1.1465 with tight stops at 1.1475.  Continued selling pressure looks to come in at 1.1500/10 adding to downward pressure.

EUR/JPY

Euro Spillover Bolsters Cross: The aforementioned euro favoritism spilled into subsequent crosses leading the EURJPY currency pair higher on the day following comments by Deputy Governor Muto.  Already taking into consideration the widening interest rate differential between the two economies, euro bulls were pleased to hear that policy makers may not be ready to lift the zero interest rate policy even as Muto confirmed growth prospects in the worldââ,¬â"¢s second largest economy.  With little economic data slated for both economies, traders will be looking ahead to next weekââ,¬â"¢s slate setting aside tomorrowââ,¬â"¢s anticipated employment report.

Rumorville: Large offers for the cross reside below current price action, with potential to place considerable downward pressure in the near term, at 142.60/70 with stops close above.  Comparatively, bids keeping the current rise are located at 142.75/80 and 142.00 with stops under at 141.50.

Richard Lee is a Currency Strategist at FXCM.