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NZDJPY

The Japanese yen reversed directions and pulled back against the major currencies following the Bank of Japans denial that it was monitoring the overextension of carry trades in the currency markets.  A popular trade for the past couple of years by hedge funds and institutional investors, it seems to have taken the market to extreme oversold levels as many an investor has shorted the yen major.  Confirming this notion has been the previously released IMM COT report which shows a record level of shorts being initiated in the market.  The report, although later shown to be falsified, would have suggested the concern over a weakened currency by policy makers, where efforts may have been made to stem the decline.  Nonetheless, expectations are rising for another 25 basis point rate hike by December with some larger positioning seen hedging for a possible rate hike in the first quarter of 2007.

Topping out at the 79.10 resistance trendline, the price action seems to have found considerable barriers above, forming a double top.  Suggestive of probable downside, bears are likely to take the momentum lower, eyeing the first barrier at 77.95 (23.6 percent fib from the 9/9-10-11 bull wave) on the 60-minute time frame.  Capping the move lower will be the imminent test of the 50 percent fib level at the 76.63, should the earlier barrier of previous resistance be broken at 78.25.  A bearish diverging histogram and penetrating death cross are confirming the downward notion.

CADJPY

Carry traders took the pair higher in theNew York session, for much the same reason as our other top three movers on the day.  Even as the market stands are overly bearish the yen, traders continued to utilize the shorter carry that the yen provides.  Subsequently, the move was significantly contrary to the path of crude oil contracts which continued to dip lower following the decision of OPEC members.  Declaring an emergency meeting earlier in the week, OPEC members decided to cut overall production by 1 million barrels.  However, the move was seen as temporary and warranted further conditional evaluation.  The fact that the statements included temporary intents further signifies that leaders are still comfortable with the level of crude oil, likely making the $50 a barrel the key support figure.  Nonetheless, with the Canadian economy still offering a higher rate of interest, there was plenty of reason to pickup the currency cross.

With the days move a simple pullback on the weeks decline, further selling is likely to ensue heading into the Asian session.  Both MACD and Stochastic are in line with the sentiment, with Stochastic already showing a formidable and negative cross in the oversold territory.  Consolidating currently, the price action is likely to break lower on a failure to support at the 104.58.  Although barriers remain on the 60-minute at the 104.43 and 104.30 figures, considerable support is likely to be absent till the 104.18 (61.8 percent fib from the session move).  However, bulls are likely to be in play should the session high be taken out, rising to a potential 105.20 print.

AUDJPY

In a similar situation as the CADJPY cross, a slight pullback looks to be in store for the AUDJPY currency cross.  Confirming the notion as always is a death cross formation in the Stochastic on the 60-minute shot, while the MACD histogram continue to build a bearish divergence.  However, the decline may be temporary, forming a supportive and key bottom at the 89.50 figure.  Already breaking through a textbook flag formation, the price action is likely to advance further on momentum, eyeing a potential failure at the 90 handle.  However, conversely, should the session low be taken out, bears will likely move to make work of the 89.00 and 88.79 (50 percent fib level from the 10/5-10/13 bull wave) before reaching a barrier at the 88.51.