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CADJPY
In the last 24 hours, the Canadian dollar has appreciated 1.2 percent the Japanese Yen, earning it the title of the days Biggest Market Mover. Canadian Mandamp;A data had the currency moving today. Brazilian firm CBRD threw in its bid for the ever attractive Canadian raw material producer Inco Ltd. A sizable all-cash offer of C$17.2 billion would compete with American miner Phelp Dodges current bid and still produce substantial cross currency fluctuations if the transaction were put through. Oil prices have also stabilized and are slightly higher after yesterdays $2 drop. However what really drove the Loonie higher was not the data or oil, but an accidental release of an internal report by the Bank of Canada. According to Bloomberg News, the BoCs internal report listed the Canadian dollar as undervalued and quoted its long term proper equilibrium value to be 91 US cents or a USD/CAD value of 1.099. Gains in the CAD/JPY were further exacerbated by weak GDP data from Japan and neutral comments on monetary policy from the Bank of Japans Governor Fukui.
Technically speaking, the CADJPY found a firm floor at its 100-day SMA and psychologically significant 102.00 handle to bounce higher on the day. The pairs impressive rally came to a halt, however, when it was unable to clear previous congestion in the 103.50-103.80 range. In doing so, it seems to have established the second peak of an inverse head and shoulders pattern with 103.79 as the resistance neckline. Given this, a breach of 103.79 could take it to heady resistance at 104.50. If it fails, however, look for test of support at 103.00 and subsequent retest of 102.00.
NZDJPY
The New Zealand dollar rose 0.9 percent against the Japanese Yen on the back of disappointing Japanese economic data. The Bank of Japan left interest rates unchanged at 0.25 percent and to the surprise of many traders, Bank of Japan Governor Fukui failed to reiterate his previously hawkish stance at the accompanying press conference. In addition, the Japanese economy only expanded by 0.2 percent in Q2, which was less than half of the consensus forecast and marked the second consecutive quarter of slower growth. This brought the annualized pace of growth down to 0.8 percent - the weakest amongst the G7. There was no economic data released from New Zealand, but over the past few days, the kiwi has been quietly creeping higher on the back of Wednesdays stronger employment numbers and yesterdays stronger business PMI survey.
Technically speaking, the NZDJPY tore through the upper bound of a wedge reversal pattern at 73.60 to reach the top of a shorter term rising channel near 74.00. Given the bullish move, the pair is likely to challenge 74.00 in the short term, with a break of the round figure suggestive of a move to a 5-month high of 74.69 and fibo at 74.84. On the flipside, any declines could find bids at previous intraday highs of 73.00-73.20 and subsequently 72.50.
EURCAD
Dragged lower by the combination of Euro weakness and CAD strength, the EUR/CAD fell 0.8 percent today. Even though European economic data released this morning was mostly positive with France reporting the strongest GDP growth in six years, upside surprises in US data sent the Euro tumbling. French and Italian GDP increased by 1.2 percent and 0.5 percent respectively in the third quarter, which validated the ECBs need to raise interest rates earlier this year. However, when it comes the Euro, US data always dominates and even though EUR/CAD does not have a dollar component, the US dollar rose against the Euro but failed to do so against the Canadian dollar. In fact, the Loonie was the only currency that the US dollar lost value against today and that was primarily due to the combination of strong Canadian economic data and the accidental release of a Bank of Canada internal report.
The EURCAD tumbled through significant support in the 1.4320-1.4350 range to challenge its 50-day SMA at the 1.4250 figure. Though the pair sharply rebounded to close above 1.4300, its break of previously impenetrable support suggests that we may see further retracement lower in the coming days. Downward momentum will likely force it to retest support found at the 1.4250 floor, while a short-term bounce will have difficulty breaching a heavy congestion zone at 1.4320-1.4350. A recently formed downward channel will likewise provide a ceiling at the 1.4400 zone.
