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Muto Remains Dovish, Exacerbates JPY Decline

Dollar bid tone lent to further yen weakness in combination with dovish suggestions yesterday from Deputy Governor Muto.  According to Muto, the Bank of Japan sees low interest rates for the near term as they attempt to augment reserves first.  The market took the comments to mean that the zero interest rate policy would be lingering for a little while longer before central bankers attempt to quell nascent inflationary pressures.  Momentum on the comments continued throughout the day as considerable stops were triggered at the 113 figure bolstering a move higher above the key figure during the North American session.  Additionally contributing to the overall pessimism looks to be the Nikkei equity index which has hit four and a half month lows and is offering a declining 4 percent return on index funds.   Looking ahead, traders will be privy to both the leading economic index and coincident indexes.  With both a simple compendium of economic releases already priced in to the market, the decline in the reports looks to simply be reflective of the decline in equities over the past several weeks.  Cross selling on EURJPY also looks to strengthen the major should the current overextension fail to hold.

Rumormill

Following the days move, the USDJPY looks to come under some pressure with heavy offers protecting the 114 figure as stops continue to hover the 113.55 figure.  Heavy offers look to reside at the top in the EURJPY, a potential setup for major sellers of the dollar component.

AUDUSD

Price Action Counters Positive Release

Aussie bid tone was absent on the session even as the economys current account balance for the first quarter came in less than expected at A$14 billion.  Triggering the Aussie dollar in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York session looked to be applied downward pressure by cross selling that took the major lower throughout before finding some bidder at the 0.7445 option defense on a maturing strike.  Giving way in later on in the session, stops were triggered as the major hit the cellar at 0.7396 with Asian institutions pulling bids below the options strike.  Losses were extended notably in the AUDCHF cross with fresh option barriers at 0.7380 and 0.7365.  Subsequently, gold and base metal prices are contributing heavily to the offer tone.  With copper and base metals leading the decline on the day, gold tanked $10 in the open leaving some to push the contract lower in tandem with Aussie long positions.  Next up, traders will be looking at a higher expected gross domestic product figure.

Rumormill

Option barriers remain key in the price with stops at 0.7375 playing a role.  Option strikes below look to come into play should the bid tone fail with stops comparatively set above at the 0.7500 figure.

NZDUSD

Position Unwinding Fuels Decline

Sellers emerged on the Kiwi front as momentum from yesterdays hawkish comments kept the dollar counter bid throughout the session.   Falling to find intermediate support, at 0.6260, cross bidding in the AUDNZD was unable to help as traders in the major continued to unwind carry positions on further US central bank rate hikes.  Overall market sentiment remained bearish leading the selloff with domestic interest remaining paltry enough to not pose a problem to the masses.  Nonetheless, participants look to be positioning ahead of both Commodity Bloc bank announcements with traders surely to be eyeing the a revision lower in growth for both while inflationary levels continue to remain higher.  Light bidding looks to be assisting in the spot consolidation heading into the Asian session with formidable buy interest emerging at the 0.6220 figure.