• NZD/USD    -1.5%
• AUD/USD    -0.8%
• AUD/JPY    -0.6%

NZD/USD

Kiwi Drops Ahead Of Bernanke Speech: Further selling sought out the Kiwi currency pair following some paring witnessed last week.  Mostly due in anticipation of tonight's speech by Ben Bernanke, some selling could be seen ahead of this week's gross domestic product figure for the commodity economy.  Should Bernanke remain hawkish on current inflationary and economic perspectives, further downside would be imminent as dollar favoritism would coincide with a technical break.  However, any suggestions of dovish intent and we may see a reinitiating of carry trade positioning.  What is notable here is the economic picture which is somewhat similar in both economies.  With both economies approaching deficits equal to 7-8 percent of overall domestic output, traders will have to decide whether the higher rate of return is worth the risk for the carry trade.  Subsequently, the only potential spark of event risk may come from visitor arrivals.  More than likely not affecting the markets, reports are for a higher than 0.3 percent rise seen last month.

AUD/USD

Pessimism Still Looms For Aussie: Australian denominations took a nose dive on the session, in similar fashion to the Kiwi counter, against the greenback.  Marking the second highest drop, the Aussie was sold off as further rate hikes continue to remain questionable amid softer inflation and flatlining productivity.  All this in light of Governor Ian McFarlane's steadfast belief that inflationary pressures remain a looming concern.  Setting up for tonight's action looks to be Dwelling Starts for the fourth quarter.  Expected to continue a decline, the lower dwelling starts report should exacerbate the downside potential on the currency pair as it is suggestive of slower growth in the construction sector.  However, the case for interest to rise again in the Aussie dollar is probable as the January Westpac leading index report is expected tomorrow.  Rising 0.3 percent in the previous report, a continuance would definitely offer some fodder for the Aussie bull to advance higher as it would suggest positive growth in the next 3 to 6 months.  Subsequently, expansion may prompt further rate hikes in the future, although unlikely in the near term.

Rumorville: Continuing offers are keeping the current price lower as selling pressure resides around the 0.7230/35 region with stops slightly above at the 0.7235 figure.  Further above is heavier pressure at the even 0.7250 and the 0.7285 figures.  Key in tomorrow's action looks to the introduction of barrier options at 0.7150 and 0.7100 that may come into play with further downside potential.

AUD/JPY

Data Helps Yen Favortism: Yen sentiment strengthened on the session as convenience store sales dipped less than expected and yuan revaluation speculation permeated the market.  Japanese store sales for the month dipped 2.4 percent, less than the expected 3.2 percent by the consensus.  Although not really monumentous, the figure confirms that consumer interest may be stronger than expected, leading to expectations of higher growth and inflationary conditions.  Coupled with the visit of U.S. Representative Schumer to China, a lot of momentum currently resides behind the yen.  As a result, coupled with further downside in the Aussie major, traders bid the currency pair lower on the day.  Subsequently, the decline also looked attributed to a technical break as the underlying cross had been consolidating over the course of last week.

Richard Lee is a Currency Strategist at FXCM.