Click here for PDF version

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

The kiwi dollar was bolstered during the session following a disappointing <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US nonfarm payrolls report.  Expected to rise by a whopping 145,000 figure, the report came far below at 113,000.  Suggestive of a slow down in the worlds largest economy, the report additionally stirs speculation that the Federal Reserve will likely halt the current tightening cycle as policy makers await further evidence that will justify a 25 basis point rate hike in the near future.  With that said, traders decided to take the carry opportunity in the New Zealand dollar even as the economy sports declining economic fundamentals.  In the overnight, the ANZ commodity price index offered some indications of a cooling economy, bolstering expectations of a slow down in consumer prices.  According to the report, prices rose incrementally by 0.4 percent in the month. 

Triggering stops on the way higher, the NZDUSD major pair was bolstered by cross buying in both NZDJPY and AUDNZD cross pairs.  In the major, stops along the 0.6200 figure were hit, supporting a move above the 0.6250 level and to the session high of 0.6270.  NZDJPY cross additionally hit highs as EURNZD bulls cut losing positions.  With profit taking imminent at next weeks open, further momentum may be provided on dollar bearishness.

GBPUSD

Pushing ever higher following yesterdays Bank of England surprise decision, the sterling was well supported in the North American session.  Breaking through the yearly high and with momentum on its side, technical levels look clear for another push higher in the major following a tepid pullback.  Fostering the move, as with most other majors on the day, was the disappointing US employment figures.  But adding to the move earlier was an increasing belief that rates are likely to continue their rise higher in the UK economy as the Federal Reserve bank stalls for the moment.  Citing record growth in two years, central bankers remain concerned over consumer price increases and look poised to raise rates at least one more time before yearend.  This will make next weeks inflation report crucial to market action with some emphasis being placed on the regions manufacturing and retail sales figures.  Should figures be well supported, bulls are likely to pounce on a probable 1.9200 test.

Presenting the largest basis point gainer of our top market movers, the sterling major looks poised for further bidding as buyers are looking to emerge at the 1.9000 figure.  Additionally, although profit taking is likely to ensue, with offers at the figure capping interim gains, pullback bids at the 1.8800 can be expected before a move higher is witnessed.

EURCAD

Traders bought Euros against the Canadian dollar during the New York session following a disappointing Canadian unemployment report.  Expected to rise by 25,000 positions, the survey showed a drop of 5,500 jobs in the month of July.  This is the second consecutive decline the report has printed and couples with the June dip of 4,600 jobs.  Suggestive of an imminent economic slowdown, the results come in line with the Bank of Canadas forecast of a mild pullback in the economy which has led policy makers to step aside from hiking rates any further.  Subsequently, the overall unemployment rate ticked three basis points higher to 6.4 percent, exacerbating the bearish sentiment.  On the flipside, however, the European Central Bank looks to continue its tightening campaign as inflationary pressures continue to loom over the economy.  The only caveat to this remains the weak consumer sector as consumption remains lackluster in the region.  Nonetheless, central bankers are still expected to raise rates twice more this year in order curb and eventually control price increases.

At a technically critical point, the cross is looking to positively test the 1.4516 August 31, 2005 low as it corresponds with the recent uptrend.  Given the closing above the level, buying momentum still remains in the cross.  However, with the upper trend line resistance offering a heavy barrier, upside gains may be capped in the short run.  Should the 1.4550 level break, however, bulls may make a run for it higher.