| Currency <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> | Daily Percentage Change (%) | Intraday High | Intraday Low | Day's Range (pips) |
| NZDUSD | +1.0% | 0.6655 | 0.6461 | 194 |
| NZDJPY | +1.0% | 78.24 | 75.99 | 225 |
AUDNZD | -0.9% | 1.1653 | 1.1365 | 288 |
NZDUSD<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Boosting the Kiwi dollar in the overnight to extreme readings was the Reserve Bank of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New Zealands interest rate decision. Expected to keep the rate at the current 7.25 percent, the central bank of New Zealand surprised markets by retaining a hawkish tone, setting up the rate for a potential hike towards year end. Noting that inflationary pressures continued to loom over the economy as several factors had markedly improved, Governor Ian Bollard added that such a rate hike scenario could not be ruled out in the near term. The notion boosted future implied rates that are now pricing in a likelihood of a rate hike in November where previous anticipation was for no rate hikes with absolutely no consideration of a cut. Prompting the decision looked to be further stabilization in the housing sector as prices have rebounded slightly with an even more impressive rebound in consumer consumption. Yesterday, retail sales figures jumped 1.3 percent higher, above consensus.
Triggering stops above the 0.6475 and 0.6500 figures, price momentum in the Asian session carried through to the overnight as bids were taken at the 0.6550 figure and above till topping out at the 0.6650 where defenses were laid. Now paring back slightly, profit taking should allow for a pullback to the 0.6592 figure (50 percent fib level from the days move) before further bids are likely to push for a retest of the session high. A failure would purport a potential double top setting bears up for the weekend.
NZDJPY
Rate hike speculation from the Kiwi major trickled into the cross pairs boosting the NZDJPY cross pair in the North American session. Subsequently, it supported a move that ranked as second for on our list of the top three movers on the day. Underpinning the pair early were notions of continued carry trade bias even as speculation has it that the Bank of Japan is likely to raise interest rates once again. Even if Japanese policy makers continue their current tightening bias by another 25 basis points, the differential still offers one of the widest among industrialized economies, standing at 675 basis points. The differential would be even wider when counting on a near term rate hike prospect by the Reserve Bank of New Zealand.
Next up for the Kiwi enthusiast will be the manufacturing activity report for the Pacific Rim economy. Consensus is leaning towards another quarter of positive growth in the sector, following three consecutive quarters of expansion. Should the survey results ring true, momentum may take the pair above the session high on rising rate hike speculation.
Hitting offers at the top of the session high of 78.24, the currency cross is pulling back as we head into the Asian session with traders taking profits from the days move. The resistance level should hold into the overnight as more offers are hanging heavy just above the session high with bids on a pullback not likely to come into play until the 77.24 figure (61.8 percent fib from the sessions move) at the earliest. Conversely, enormous upside potential exists should bulls break through the session high, eyeing the 79.35 figure as the next barrier.
Even as the Australian economy poses a better prospect for the current trader, fundamentally speaking, the carry continues to remain the focus of the market. As a result, with the Kiwi economy bolstering a 725 basis point return on assets, the market sided with the New Zealand dollar on the session. The sentiment was boosted with subsequent statements by the Reserve Bank of New Zealand that didnt preclude any further rate hikes in the short term. Consequently, with bears on the side of the currency cross, the pair tops the list of our market movers on sheer basis points. The pair, although outranked in percentage, topped our chart with a whopping 288 basis point drop. Now hovering above the 1.1400 figure, sellers are looking slightly overextended, opening the pair up to some profit taking on the four session move lower. Nonetheless, should the session close below the key psychological level, the market would not cast aside the notion of a 1.1200 touch.
Oversold at the current market price, bids are coming in strong to minimize the downside risk still looming in the currency pair. Taking to the 1.1400 handle, plenty of support is coming in to keep suggestions of a slight pull back with both MACD and Stochastic showing golden crosses to bolster the notion in the 60-minute shot. Should bulls take to the suggestions, the momentum would be in favor of retest of the 1.1500 in the overnight. Conversely, however, should bears win out, longer term dailies are showing a test of the 1.1200 before you know it.
