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NZDUSD<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Kiwi Rides On

Directional bias remains muted in the major currency pairs with price action still confined to the range bound scenario witnessed over the past week or so.  One notable exception on the day is the NZDUSD, which moved higher despite rising sentiment that tomorrows NZ current account deficit will set a record gap.  Additionally, the push higher was sparked in light of positive US data that suggested an underpinned slowdown of the overall housing sector.  Rising 5 percent on the monthly comparison, the rise in housing starts signals a balanced pullback versus a precipitous plunge earlier estimated by some.  Nonetheless, Kiwi bidding overtook the major pair with an unlikely culprit in the AUDNZD cross extending the greenbacks losses.  In the overnight, trading incrementally higher, the AUDNZD cross was unable to pierce through topside resistance triggering stop orders on the way down from failure.  The cross play, as a result, kicked the major higher as demand for the Kiwi climbed.  However, secondary gains may be hard to come by at this point in time as we enter the Asian session.  

Rumorville

Offers still remain heavy on the AUDNZD cross pair at 1.1920 and above at 1.1965 in the near term.  This should weigh the pair down lower with comparable bidding or buying interest emerging at the 1.1860 figure, as thin stops below attempt a barrier at 1.1850.

USDJPY

Fukui Kicks Pairs Bias Into Bearish Gear

Japanese yen was on and off the bid throughout the session with concern over North Korean weighing heavily on the major.  However, countering were rather hawkish comments made by Bank of Japan Governor Fukui.  Stating that monetary policy should be shifted without delay, the policy officials statements sparked interest rate speculation, with the market already pricing in a decision by July at the earliest.  This led the major lower, initially, before rumored dollar bidding trumped earlier yen bidders with the likes of German, US and Middle Eastern greenback buyers.  With the US still offering a higher interest rate and the market bidding higher for another two rate hikes, strength still resides with the US single currency, albeit for now.  Futures traders are pricing in a 100 percent probability of a 25 basis point rate hike at the end of the month, with another 25 basis point rate hike in August likely at 70 percent.  Further consolidation can be expected, as a result, until next week when Federal Reserve policy makers meet.  Separately, domestic asset classes remain under pressure as the Nikkei 225 is currently down 9 percent on the year with bonds continuing to post losses on the hawkish comments.

Rumorville

Rumored importer and hedge fund buying is expected at the 114.60 figure and below as a Japanese bid attempts to enter with size.  However, comparative selling is expected at the 115.20 and higher, with sellers emerging at the 115.50 figure.  Considerable downside looks to be applied on the pair as the price approaches the 116 barrier option.

EURJPY

EUR Gets Boost From Afternoon Squeeze

Similar to USDJPY action, the EURJPY cross came under pressure following a better than expected US housing starts report that drove the Euro major lower in the morning.  However, both the major and cross currency pairs were boosted in the afternoon following a short term burst in rumored bids from central bank buying with institutional bids triggering a short squeeze.  Forcing traders who were initially short in the currency pair to buy back positioning prematurely, the short term buying interest bolstered a move above the 1.2600 figure before stalling and then falling in the major pair.  Heading into the Asian session, further demand for euros is noted by central bank bidders and may trigger another topside test in the near term.  With regards to economic data, French consumer spending is tepidly expected as most market participants are likely to keep to the sidelines till Fridays US durable goods orders report.