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Speculators reinitiated long positions on the Canadian dollar following crude oil contracts that were bid throughout the North American session.  Settling just below the $62 a barrel mark, buyers emerged to take the contract higher as it seemed that the $60 support figure would hold indefinitely.  Coupled with rumors of potential Middle Eastern bids in the near term to buoy prices, traders continue the notion through to the CADJPY currency cross pair.  In addition to potential upside profit the pair remains a carry trade favorite as the interest rate differential continues to favor the long side.  With crude oil likely to make some further gains heading into the end of the week, cross momentum may continue into the Asian session, discounting any positive reporting by the Japanese surveys in the overnight.

Expected for the Asian session are key releases, reflective of the worlds second largest economy.  Retail trade is expected to rebound from negative figures in July as consumers look to ramp up spending before Fall season.  Consensus has pitted the August released to pop higher by 2 percent with a 1.1 percent surge in the monthly comparison.  Subsequently, larger retail figures are expected to pare back the red figures, ticking lower at 1.1 percent.

EURJPY

European data was optimistic on the session, purporting further carry trades in the market as speculation continues to side with an imminent rate hike in the Euro zone region.  In the overnight, traders were privy to the German GfK consumer sentiment survey.  Expected to rise to 8.6, the reading came out stronger at an 8.8 figure, coupling higher business confidence and rising retail sales figures in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Italy.  In addition to the string of positive figures was the Swiss leading indicator.  Although declining from previous increases, the figure remains buoyed by an economy that is evidently continuing its expansion.  All things considered, coupled with statements throughout the New York session by European Central bank members on rising inflationary pressures, futures traders may have it right, still pricing in a good chance of two more rate hikes before year end.  Separately, money supply grew at an above consensus pace, confirming the notion of consumer level inflation as there are now more cash following trickling supply of goods.

Downside looks imminent for the EURJPY as the price action begins to pullback on bids at the 149.25 support figure.  Confirming the notion is the death cross forming in the Stochastic oscillator, in addition to a divergence that marks bearish undertones on the 60-minute chart.  As a result, bears are likely to be eyeing the 148.73 on a retrace of the two day move higher.  Conversely, a break above would see bulls eye a ceiling test of 149.50/75.  

EURGBP

Pound traders were absent on the session, even as economic reports supported a move higher in the sterling versus the euro.  Reports for gross domestic product were in line with estimates, pitting the UK economy to grow at a 2.6 percent pace by the end of the year.  On a quarterly comparison, the figure rose 0.7 percent against expectations of a 0.8 percent climb.  However, stealing the thunder for the day was the CBI distributive trades report.  According to the report, retailers are continuing to expect a higher rate of growth as consumers, boosted by rising housing prices and a positive employment picture are spending more of their money.  The report should be suggestive of a higher GfK consumer sentiment survey expected to be released on Friday.  The reports will underpin current sentiment that the Bank of England will continue its rate tightening cycle well into year end.  Now, the question remains as to whether or not further tightening is needed heading into the new year.  Nonetheless, traders took profits on long pound positions and look set to re-establish bids on technical support.

Following the days move, bids are likely to emerge as the price action tests the topside resistance trend line at the 0.6730 figure.  The level should hold strongly, purporting a pullback in line with the death cross that is forming in the Stochastic.  Already dipping below the 80 overbought figure in the 60-minute, bears will likely eye the nest support 11 basis points below at the 0.6710.  A break lower would form a near term test of the 0.6690 level.  Conversely, should price action break higher, a bottom may be forming as the price action retests the ceiling at 6760.