By DailyFX – GBPJPY.No More Cuts.Surprising to the upside, British retail sales data rose for the month by 0.7 percent according to the Office for… … National Statistics.Compared to the consensus estimate for a 0.3 percent rise, the better

than expected figure sparked speculation that the Bank of England may
not have suggestive data in justifying a rate cut at this particular
time. As a result, with the 4.50 percent benchmark rate seemingly
stable, traders bid the underlying major higher leading to strength in
certain crosses. Additionally, the upbeat figure may ultimately add to
better expansion prospects as market players await tomorrow's gross
domestic product figure.

Carry Trade Potential
A carry trade candidate, the GBPJPY cross was bid higher with
participants taking further advantage of the wide interest rate spread.
Garnering 450 basis points, earlier selling pressure was felt as
speculation was leaning towards a rate cut bias in the United Kingdom.
Given the shrinking possibility, traders mounted on already profitable
positions. Additionally adding to selling pressure on the Japanese yen
leg, convenience store sales dipped 0.3 percent for the month of
September. Although the figure improved on the 1.3 percent decline seen
in the previous month, the retail figure still resides in negative
territory.

Technically Speaking
Already overextended on the current bull wave, a retracement similar to
the one witnessed on the 19th looks imminent, if only to stall further
moves higher on the cross. With that said, a test of the 38.2 percent
fib at 203.13 looks probable with a less likely penetration of the 50
percent leaving to a reversal of the uptrend.

CHFJPY

Monetary Conditions Too Loose
Sparking nascent interest rate hike speculation, Swiss National Bank
President Jean-Pierre Roth stated that monetary conditions currently
were too loose to contain inflationary pressures as the “economic
situation is improving.” The SNB sees the annualized measure of GDP
growth around 1 percent with higher estimates of 1.5-2 percent in 2006.
Subsequently, inflation is looking to rise above the 2 percent level as
well given growth forecasts are met. As a result, Swissie traders bid
the underlying major slightly higher with gains additionally seen in the
crosses.

A Carry Trade Is Still A Carry Trade
As the Swiss economy contemplates rising interest rates, traders are
yet again taking advantage of the zero rate policy in the Japanese
economy. With expectations rising on today's comments, the spread may
now be expected to widen to a full percentage point or 100 basis points.
Although most carry trades are boasting far more in gains on the
differential, a weak carry trade is better than none at this point.

NZDUSD

Fundamental Push
With inflationary pressures continually rising in the New Zealand
economy, traders are speculating on further near term rate hikes
boosting the underlying major throughout the session. With continued
strength in consumer demand and higher housing valuations, the country
seems to be poised for further growth entering 2006. However, along
with growth and expansion, not to mention still relatively lofty
commodity prices, inflationary pressures are set to rise above 3 percent
in the country. Already pricing in a 25 basis point rate hike, talk of
a full 50 point jump raised overall interest in the underlying pushing
the price action past the recent consolidation.

US Speaks Hawkish Bias
Traders for the most part, concentrating on the potential rise in rates
for the Kiwi country, tossed aside recent dollar strength and further
hawkish bias from several Fed officials speaking on the day in trading
the major. Notably, Fed Governor Donald Kohn stated that although there
are inherent risks of a slowdown in growth domestically, “after the
rise in retail energy prices, the risks may be skewed a little toward
the upside on inflation.” In addition, an affirmation by Dallas Fed
President Richard Fisher stating “the object will always be to keep
inflation at bay, so that the American business machine can keep on
humming” confirmed the overall hawkish sentiment.

Technically Speaking
Breaking through recent consolidation further upside potential exists
for the major currency in the near term. Bolstering the notion, the
underlying spot price action ripped through formidable resistance at
0.6990 to trade at the intrasession high of 0.7025. With the move
slightly overextended the first test on a potential retracement looks to
be the earlier 0.6990 resistance which now serves as support. Any
penetration would see an imminent test of the 38.2 percent fib at
0.6973.

By DailyFX