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

Market Pushes Aside <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Positive Tankan

The Canadian dollar leg received a boost on the day despite rising economic optimism from the overnights Japanese Tankan report.  Lending to Loonie optimism was firmer gold contract prices and rumors of a considerable investment in Alcoa by BHP Billiton and Rio Tinto.  In this particular case, with the investment equating to 60 percent of Alcoa, traders figured some demand would be shifted to the Canadian dollar side of things on the cross border deal.  Additionally, it follows the recent offer by Phelps Dodge for two Canadian based mining companies in recent weeks.  The latest rumored bid continues to purport the recent wave of consolidation which is benefiting the commodities sector.  Subsequently, the bullish loonie sentiment overshadowed the higher than expected Tankan survey, which would have increased speculation in favor of a rate hike decision in mid month by the Bank of Japan.  Currently in the longest post war expansion, the economy is continuing to move ahead and print positive growth figures, boosting business investment and confidence.  Coincidentally, the report has sparked some speculation that this month will be the month rates will finally rise for the first time in six years.  However, it could spark any activity versus an economy already offering more than zero percent interest.  As a result, the pair looks to continue in the range bound scenario on the observance of tomorrows July fourth holiday.

Rumormill

With option expiries out of the way, vanilla USDJPY options at 113.00 and 114.30, further bids look to take place above the 103 handle with sellers emerging at the 104.00 figure.  With paring likely in thin holiday volume, buyers are sure to re-emerge at the 102.50.

NZDUSD

Kiwi Still Under Pressure

Traders pared back long positions from Fridays move to test bids slightly above the 0.6050 figure but fell short when rising to test Fridays highs.  The mornings weaker US data lent to some Kiwi strength, albeit temporarily, as ISM data was below expectations with the prices paid component lending to further hawkish bias by the Fed.  However, the mornings gains seemed to have been received as a simple of delay of the inevitable as further selling bias is seemingly plaguing the Kiwi dollar.  Uridashi maturities and the widened deficit seen last week are contributing to near term downside in the domestic currency with major investment houses still looking to sell on any upside rallies.  Conversely, on the flip side, the US dollar economy has plenty of releases pitted for this week with tomorrows factory orders the next step of business.  This should set up for a carry through into the week ending nonfarm payrolls report where a bounce can be expected on whispers of a below expected print.

Rumormill

Trading remains thin as we head into the Asian session and the July fourth holiday.  As such, bids are touted at 0.6060, near the current market, with thin shorts emerging at the 0.6100 figure.

USDCAD

Firmer Commodities Help CAD

The Canadian major benefited from firmer commodity prices and slightly weaker than expected US data, rising up to the third spot on our top three market movers of the day.  In tune with the rangebound scenario that has been witnessed over the past two months, the price intraday price action was contained in a relatively 40 pip range as both buying and selling pressures were thin before the US holiday.  With economic data nonexistent until the Wednesday after, speculation was boosted by commodity correlations and speculative buying on a far reaching report that indicated $4 billion in duties to Canadian companies, boosting softwood exports.  Looking ahead, with dollar data surely to dominate, the upcoming releases may add little to the loonie bull defenses as the market looks to the Ivey purchasing managers report, not pitted till mid week.