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In observance of the Labor Day holiday in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US and Canada, markets were sluggish at best.  However, one pair that bucked the traditionally slow holiday conditions was the GBPJPY.  Recognized as one of the carry trade favorites of the year, the cross pair was subject to some selling pressure in thin holiday trading as capital spending in the Japanese economy read stronger than earlier consensus figures.  The supported figures now boost speculation that the Bank of Japan may indeed be following through with further rate hikes in the benchmark interest rate.  According to the government report, business spending was boosted by a 16.8 percent jump versus expectations of 14.5 percent in the second quarter.  Subsequently, the figure reflects optimism among business leaders even as consumer demand has been tentative at best.

Seemingly overextended on the 60-minute chart, the 220.50 figure is adding to considerable support for the 220.75 figure that is currently holding the price action.  Coincidentally, the support floor is acting in tandem with the 220.62 level (50 percent fib from the 8/18-8/31 bull wave).  With resistance tepid at the 221.38 figure, bulls are like to set their sights on the 222.31 (23.6 percent fib from the aforementioned level) as bids are looking to emerge at the 220.62 floor.  Both MACD and Stochastic are bolstering notions for the overextension to the short side.

AUDCAD

Crude oil weakness continued to propel short sellers of the Canadian dollar even as the markets were closed in observance of the holiday.  The selling pressure conversely boosted the Australian dollar leg of the cross as gold contracts were bid for the most part in last weeks action.  In addition, traders are likely to be bidding up ahead of the AiG manufacturing index and the Reserve Bank of Australia meeting.  Consensus expectations are strong for the manufacturing index, as estimates are pitting results reflective of continued expansion in the Pacific Rim economy.  The survey results, should they be positive, would blend nicely with statements from Governor Ian McFarlane that are expected to remain hawkish on inflationary pressures in the region.  Already setting the cash rate another 25 basis points higher in the quarter, the central bank is once again expected to raise another 25 basis points by year end in attempts to curb price increases.  Subsequently, the notion would boost the rate advantage Aussie dollar based assets offer against the Canadian dollar, promoting bids on pullbacks.

Continuing off of gains seen on Friday, the cross seems likely for an intermediate pullback to the 0.8514 (23.6 percent fib from the 8/31-9/4 bull move) level.  Any failure to hold and bears are likely to pound on the 0.8495 level (38.2 percent fib from the aforementioned move).  Both Stochatic and MACD reads are suggestive of such a mid term pull back.  Conversely, a break above the session high of 0.8544 would propagate a move higher above selling defenses a the 0.8550 figure.

NZDJPY

The NZDJPY cross pair failed to hold the 76.50 support level at the start of the week even as reports were in line on the inflationary front for the Pacific economy.  Although prices rose 0.4 percent according to the commodity price report, the cross was subject to short selling on the notion of a sentiment shift, at least in the mid term, in favor of the Japanese yen.  Although sparked by the better than expected capital expenditures data seen in the overnight, continued selling against the carry was purported by two key notions that emerged.  First, traders are noting the overly short speculative positioning according to the latest Commitment of Traders report that was released last week.  Conversely, commercials have amassed a larger true positioning in long yen contracts, boosting the speculative contrarian sentiment.  Added to the COT positioning was further gains made by the Chinese yuan in the overnight.  Trading at record levels, a stronger Chinese denomination will boost the competitiveness of Japanese exported goods in the foreign markets.  The two notions, coupled with thinner than usual holiday volume is boosting the downside bias, at least for now.  However, the markets remain wary of the yen majors ability to hold the 116 figure, underpinning the thought that bids are emerging at the close.

On the 60-minute chart, support bidding is coming in heavy at the 75.40 figure (50 percent fib level from the 8/24-9/1 bull move). With price action closely bundled, this is leaving the cross pair with little room to wiggle as the price action is seemingly contained by the upside ceiling the 75.82 resistance, providing a tight range.  With stochastic fast approaching the overbought figure, any current buying momentum is likely to occur at the 76.30 figure with MACD confirming.  Conversely, a failure to hold at the current support would purport a massive downslide to the 73.75 figure, site of previous support.