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Shifting gears, traders shorted the EURCAD currency cross pair as business confidence in the Euro zone dipped for the third consecutive time in four months.  Expected to dip to 104.4, the survey results were better than consensus printing a 104.9.  However, the fact that Septembers results continued the downtrend was reason enough for traders to pare back positions, taking the cross lower and topping our list of the three top market movers.  Attributed to the lower readings was concern over rising taxes in the coming quarters as government policy is looking to possibly hike VAT and higher end income taxes.  Higher taxes subsequently restrict the spending power of consumers, and will more than likely crimp growth prospects.  Subsequently, the expectations component was far less than expected, dipping to print a 98.9 versus consensus expectations of a 100.5.  The mornings reports have catapulted the necessity of further rate hikes into the spotlight and will likely to weigh on the Euro in the interim as traders bid the Canadian dollar leg higher.

Consolidating at the bottom of the range bound scenario, Euro bulls look likely to return to the foray, with the price action approaching the 1.4100 figure.  Confirming on a golden cross by the Stochastic and positive reflection by the MACD, bidders will likely emerge just below the current market.  As a result, bulls will likely eye the 1.4158 resistance (S1 weekly pivot) on the 60-minute chart with momentum likely capped at the topside resistance of 1.4250.

CADJPY

Bid higher on the session, traders continued to take advantage of the positive carry offered by the CADJPY pair in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York hours as crude oil contracts remained bid above the $60 a barrel mark.  Although pulling back slightly into settlement, contracts remain supported by statements that OPEC may consider defending the $60 a barrel mark as the recent slide had been deemed disconcerting individual members.  Beneficial for the Canadian economy, the price of crude oil is offering temporary relief to a currency that has been battered by dying interest rate expectations.

Bullish positioning is likely to remain temporary as plenty of Japanese data for the week is expected to lend the downtrodden currency a helping hand.  For the end of the week, inflationary data is likely remain supported as the consumer price index is expected to rise above the consensus figure as industrial production is estimated to have turned positive.  Conversely, the upcoming Canadian report on Industrial product prices is expected to pullback, suggesting the absence of inflationary pressures.

Overextended, slightly, the CADJPY cross looks ripe for paring following the massive uptrend witnessed in the New York session.  However, falling short of the topside resistance of the longer term channel in the 60-minute, final bidders are likely to test the upside barrier.  Should the level fail, bears would eye a continuation towards the 103.50 bottom support, but not without tests at the 104.50/25 figures.  On a break, bulls would indefinitely be focused on taking out the 105.75 level on way to the 106.50 figure.  Oscillators are confirming with overextended buying suggestions.

NZDUSD

Declining on a morning report that showed a widening trade deficit, the Kiwi major was further trounced on following comments by Finance Minister Cullen.  Speaking in an interview, the Finance Minister indicated that the recent spurt of demand in the Kiwi currency has been boosted by hedge fund speculation, taking short term positions on the carry trade side.  As a result, taking into consideration fundamental aspects of the economy and not speculative forces, rates in the near future will likely not rise.  On the other hand, rate cuts are not to be expected till 2008.  This notion leaves the bullish trader in a standstill as rates are still attractive, however prospects for further expansion remain limited for the underlying major.  Following the afternoon comments, traders will likely look ahead to the economys gross domestic product report in gaining further directional bias.

Dollar data was surprising on the day as consumer confidence was positively buoyed in the month.  Expected to rise to a print of 103, the consumer confidence report rose to 104.9, reflective of the 24 percent decline in crude oil and energy prices.  Lower gas prices fed more disposable income into the hands of spenders, lifting spirits for the moment.  Although the good vibes may be temporary, the report gives hope to dollar enthusiasts of a softer US economic landing.

Following the tremendous decline seen in the afternoon, the NZDUSD looks ripe for profit taking as short sellers pare back positioning heading into the Asian session.  Hitting the 0.6559 figure (S1 pivot calculation) definitive support is likely to keep the major bid through the overnight.  However, a break of the current floor, and subsequent defense at the 0.6534 figure (50 percent fib from the 9/11-9/25 move) on the 60-minute chart will keep bears eyeing the 0.6500 psychological level.  Bullish momentum at market price will likely see gains capped at the 0.6650 figure.  Stochastic confirms the notion, forming a golden cross.