• AUDNZD +0.3
• AUDJPY +0.3
• EURJPY +0.1

AUD/NZD

Short Covering Keeps AUD/NZD Bid: Narrow ranges dominated the day as the market remains light ahead of the holiday weekend.  For the most part, with traders away from the market, the dayââ,¬â"¢s action was dictated by short covering on yesterdayââ,¬â"¢s bearish Aussie outlook.  As a result, even as the pair runs through the 0.7292 highs, heavy selling pressure above looks to cap any further advancements on the day.  Notably offers are running thick at the 0.7300 figure and 0.7350 option barrier.  With plenty of protection at the barrier, further gains looked to be capped with no expectations of a sudden spike higher, a couple hours away from the close.  Subsequent cross short covering is also boosting the pair as traders turn their attention to next weekââ,¬â"¢s data including a potentially favorable consumer price index report the following week.  Should the report be higher, speculation on short term rate hikes would boost the major and underlying crosses higher.  However, Kiwi strength still remains strong.  Bolstered by continued momentum from the previous retail sales data, further advancement exists on the expectations that inflation remains looming over the economy.  This will sway the RBNZ in keeping rates at the current 7.25 percent at the April 27th meeting.

AUD/JPY

Expectations Run On Next Weekââ,¬â"¢s Data: As with the AUDNZD cross pair, short covering took over the AUDJPY cross with comparative USDJPY buying adding to the move.  Industrial production out of the U.S. was slightly better than expected, further confirming the probable 25 basis point rate hike in May by Fed officials as it rose 0.6 percent on the month.  However, the pair looks to come into question with several notable releases in the worldââ,¬â"¢s second largest economy including industrial production and merchandise trade balance.  Should data be released higher, the reports may spark speculation of earlier than expected rate hikes.  However, with statements issued by policy makers and headline government officials recently, the likelihood of an upward rate decision will be small till the summer months.

EUR/JPY

Central Bank Diversification Helps Cross: Cross pair action was thin, as throughout the market, leaving the EURJPY cross caught in a tight 28 pip range for the day.  Technical levels are keeping the pair from moving higher above the 143.70 figure pushing the pair back below the 143.59.  Subsequently, heavy offers are queued at 143.80 and the even figure adding to downward pressure ahead of the shortened session.  Upside potential remains and looks to be sparked at the open on Monday as further central bank diversification notions keep the euro major and cross bid throughout the week.

Richard Lee is a Currency Strategist at FXCM.