Click here for PDF version

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

Traders took advantage of a higher than expected manufacturing survey in order to square positioning in the cross and boost the Australian dollar leg higher.  In the overnight, the Australian Industry Group PriceWaterhouseCoopers performance of manufacturing survey jumped 2.4 points to post a 52.1 in the month of August.  Comparably higher than the July figure, the uptick was boosted by gains seen in seven of the twelve sectors with most of the increases seen in the chemical, petroleum and coal product sector.  The survey underpins near term speculation of higher rates later on in the year as expansion is clearly on the up and up in the Pacific rim economy.  Coincidentally, this served as the perfect reason to pare back recent short positioning in the cross as model funds and overall speculation has taken the pair lower over the past month.  However, with inflationary pressures still rampant in the Kiwi economy, bids on pullbacks next week could be expected barring any significant bidding below the 1.1600 handle.

With the overall daily support broken at the 1.1800 figure, bearishness still looms heavy on the cross pair with offers likely to be taken at the 1.1722 (38.2 percent fib level from the 8/29-8/31 bear wave) on the 60-minute shot.  Any further upside momentum is likely to be capped above at the 1.1760 figure where bids are likely to emerge on a break above.  Comparatively, bears are likely to resume the downtrend on a break below the 1.1676 (Aug 31. hourly close).

AUDCAD

Similar in the AUDCAD currency cross, traders deciding to square positioning on the weeks end, reversed short sells on the release of better than expected manufacturing data.  Additionally, market participants were boosted by the correlation that the commodities still hold on the currencies as crude oil fell further through the key $70 a barrel support figure, looking to settle lower at $69.10 ahead of the weekend.  Comparatively, gold contracts on the COMEX division were priced higher, trading above $630 a troy ounce.  Gold contracts tend to boost Aussie spot prices as crude contracts conversely underpin Canadian dollar fluctuations.  The notion boosted the cross higher as rather in line US employment data contributed to a higher Aussie effect.

Finding support at the 0.8365 figure, the underlying cross is looking slightly overextended to the upside as the daily perspective continues to purport a bearish bias.  Resistance is now coming in mildly at 0.8500 and will likely be an area riddled with sellers.  However, should a break to the upside occur above the ceiling, further offers may be triggered above at the 0.8550 figure with heavy capping at the 0.8600 handle.  Comparatively, should the pair break lower, bears would be eyeing a potential move lower to the 0.8250 figure.

NZDJPY

Reaching considerable barriers at the 77.00 handle, the NZDJPY currency cross was subject to position paring, much like in the AUDNZD currency pair in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York session.  Rising on model fund bidding over the course of the month, month end squaring and lack of economic data sparked trader shorting on the session.  Although bids on a pullback are likely at the weekend open, further momentum may remain questionable as the Japanese capital expenditures survey is scheduled for release in the overnight on Monday.  Already rising by 13.9 percent in the first quarter, CAPEX is expected to increase on higher corporate sentiment.  However, with economic data to the downside in recent sessions, it wouldnt be a surprise if business spending was lower on estimates of a near term slowdown in the worlds second largest economy.

Nonetheless, the fact remains that the pair offers one of the widest interest rate differentials in the market.  Subsequently, this notion makes the cross one of the favored carry candidates as funds are buying into the momentum and expectations of further widening on RBNZ rate hikes.

Overextended on the buy side in the daily picture, the cross looks ripe for an intermediate pullback before further gains can be made higher.   As a result, bears are looking to gain some strength to the 76.30 figure (23.6 percent fib from the 8/25-9/1 bull wave) with further protection at the 75.82 level (38.2 percent fib from the aforementioned move).  Comparatively to the upside, should the pullback effort prove thin, bulls will be eyeing a break above 77 for confirmation.  Stochastic is siding with the notion, looking to tick higher above the oversold levels.