• NZD/USD -0.7%
• AUD/NZD +0.6%
• GBP/JPY -0.3%

NZD/USD

Manufacturing Swings Low: Kiwi bears continued their push as manufacturing slipped considerably in the month of January.  Although the period is usually associated with a slow down in production, figures according to the Business New Zealand declined to historical lows calling into concern future economic growth prospects.  Released in the report, all five sub indexes fell to cellar dwelling levels with new orders dipping to the lowest level ever.  As a result, with manufacturing activity sluggish and consumers reluctant, further expansion and subsequent rate increases remain questionable at best.  This will place plenty of unwanted downside action on the underlying in the near term as carry traders and speculators begin to liquidate holdings on bullish U.S. data.  Unfortunately, the only saving grace will come in the form of the trade balance figure which narrowed significantly last month from astronomical proportions.  Unfortunately, the report is set for release more than a week later, offering bears an elongated period to drive the major lower.

Rumorville: Bidding looks to prop the underlying major heading into the Asian session at 0.6680, where support looks to be established in the short term.  With further downside bias, any upside retracements look to be met with short reinitiation at 0.6740.  Bidding, regardless of form, looks to resurface around the even 6600 figure.

AUD/NZD

Australian Dollar Bidding Props Cross: More so for Kiwi dollar selling than Australian dollar uplifting as the cross pair was the only significant gainer on the day.  Powering bears was spillage from the Kiwi major selloff on the day with concerns growing by the minute of future growth prospects in the country.  Comparatively, keeping the Australian dollar bid seems to be anticipation of central bank Governor Ian McFarlaneââ,¬â"¢s testimony to Parliament.  Similar to the recent testimony given by U.S. Federal Reserve Chairman Ben Bernanke, the underlying statements are expected to ring to the same tune as previous statements issued by the Reserve Bank of Australia.  Inflation is expected to remain looming, however, contained as growth remains at a healthy pace.  As a result, with no further economic data set for the end of the week, and relatively dovish comments expected from the governor, the underlying major looks to keep to the levels that it has held for the past week.

Rumorville: Near term bidding looks to be keeping the underlying major propped in the Asian session as buying interest looks to reside at the 0.7350/60 area.  Comparatively, offers and selling interest look to act as resistance against the current spot at 0.7390 and 0.7400.

GBP/JPY

Sun Set To Rise Again In Japan: Traders pared back pound positions as it became apparent that economic conditions were not as bright as policy makers had made it out to be in yesterdayââ,¬â"¢s quarterly inflation report.  Retail sales, a major contributor to overall economic growth, declined worse than expected, 1.3 percent on the monthly gauge for January.  Bringing the annualized figure lower to just above 1, retailers are still saddled with consumer reluctance in spite of growing stabilization in the housing market.  Nonetheless, market sentiment is mounting of a forthcoming interest rate cut in the near future as the central bank attempts to spark further growth.  Comparatively, driving Japanese yen bid interest seems to be growing anticipation of Japanese gross domestic product figures.  Although figures may ultimately be released slightly lower than expectations, anticipation is growing that the figure will be approximately 5 times the previous reading, surpassing both US and European growth in the fourth quarter.  This will now lend to further speculation of rising interest rates, earlier than had been anticipated.  However, keeping bulls at bay seems to be earlier comments by a board member that inferred continued low rate bias.

Rumorville: Selling interest looks to exacerbate should the underlying major retrace from the midday spike above resistance at 1.7360 after pure bid interest was tripped in the area.  Selling interest looks to surround 1.7380 with thin interest all the way down to 1.7350.  Further bidding resides above the 7400 figure.

Richard Lee is a Currency Strategist at FXCM.