• USD/JPY +1.0%
• NZD/USD  -1.35
• EUR/JPY +0.7%

USD/JPY

Yen Rate Hike Expectations Delayed: Dollar initiatives were revitalized during the session as Japanese data and statements by the Prime Minister Koizumi were used as reasons to begin profit taking on last weekââ,¬â"¢s move.  Japanese capital spending rose less than expected, increasing 8.8 percent on a monthly comparison even as the overall figure, which includes software, rose 9.5 percent.  Still suggestive of overall expansion, as companies invest in production domestic and abroad, the slightly less than consensus figure may be indicative of hesitation due to a possible shift in monetary policy.  Separately, Prime Minister Koizumi noted that although he conceded to the assessment that inflationary pressures are bound to rise in the economy, he added a word of caution to the Bank of Japan. Statements professing his confidence in Bank of Japan Governor Fukui were shortly followed by concern that policy makers may be acting to prematurely if they decide to raise interest rate in the near term.  As a result, with a good portion of market participants awaiting a near term rate hike, bears pounced on the news driving the pair higher through the 117 barrier.  Lending to dollar strength was a more detailed look into todayââ,¬â"¢s disappointing factory orders report.   Although declining in the month, a rise of 1.6 percent was seen in orders when excluding 68 percent plunge in demand for commercial aircraft.  Now with a slight retracement in the pair, players are weighing the odds of trading the bounce back ahead of the policy meeting later this week.

NZD/USD

Dour Sentiment Leads Kiwi Lower: Expectations surrounding Reserve Bank of New Zealand Governor Ian McFarlaneââ,¬â"¢s option to cut rates spooked Kiwi traders, taking the currency pair lower through the 0.6600 support figure.  Further bearish bias still looms as traders continue to remain concerned over the viability of the economy as the infrastructure remains weak.  Consumer interest is lower as housing sector is declining in line with overall output prospects.  Event risk is also weighing in on the pair ahead of the awaited rate decision, as subsequent statements will be scrutinized in establishing any near term direction.  Nonetheless, a slight pull back looks to be in the works as the underlying spot continues to consolidate heading into the Asian session with the move being technically overextended.  However, upside looks limited with further selling pressure sure to be reinitiated in the near term.  Separately adding some weight in the near term looks to be a lack of Australian inflationary suggestions in yesterdayââ,¬â"¢s TD securities report.  Falling 0.1 percent in the month, prices seem to be declining, as the annualized comparison declined below the 3 percent target range.

Rumorville: Stops are noted at 0.6540 and 0.6545 as bidding has continued the dayââ,¬â"¢s theme, remaining absent with further selling awaiting event risk from  Australia.

EUR/JPY

Cross Boosted By Better Data: Keeping the Euro bid against the Japanese yen were the upbeat manufacturing figures seen in the month.  Overall Euro Zone manufacturing rose in line with consensus measures of a 49.6 reading.  Subsequent measures in the underlying component economies also saw an uptick with the only downside action originating from Italy.  With retail sales figures rising 0.8 percent in January, conditions continue to remain buoyant for further rate hikes as inflationary pressures continue to loom over the region.  Add profit taking into the mix on the EURJPY cross and you have a retracement back to the topside of the channel that has presided over the price action in the past session.  However, upside look to be limited as the dayââ,¬â"¢s bullish momentum wanes slightly as we head into the Asian session.  Next up to spur some downside preference will be tomorrowââ,¬â"¢s machine tool orders report.  Notably volatile, the report should continue to purport a sustained exporting sector, leading to further notions of rate increases from the Bank of Japan.

Rumorville: Offers are keeping current momentum restricted at 141.30 and higher up at 141.50 keeps fund selling interest.  Continued selling remains up above that at 141.65 as bidding from the downside is limited.

Richard Lee is a Currency Strategist at FXCM.