NZD Soars In Asian Session

New Zealand dollar soars in Asian session after RBNZ left rates unchanged at 2.50% as widely expected. More importantly, the central bank indicated that a rate hike would likely be required in 2014 as inflation picks up. The comment had the effect of sending the NZD higher although the Governor reiterated his warning that the exchange rate has remained elevated and this might be detrimental to exports. The RBNZ has also revised the 3-month yield to 3% in 2Q14 from previous estimate of 2.6%. The revision suggested that the policy rate might rise in 1Q14, instead of 2Q14 as suggested in June. More in RBNZ Indicates Rate Hike In 1Q14.

The NZD/JPY remains the strongest pair this month so far, and this week's strong rally confirmed that the pull back from 86.39 has finished already. Rise form 75.08 is tentatively treated as resumption of larger up trend from 58.02. Further rise should be seen back to retest 86.39 first in near term. A break will target 61.8% projection of 58.02 to 86.39 at 75.08 at 92.61. However, below 78.77 minor support will dampen the bullish view and turn focus back to 75.08 support instead.

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The Australian dollar, on the other hand, tumbles today after weaker than expected job data. The employment market contracted -10.8k in August, versus consensus of 10.2k growth. The unemployment rate also rose to 5.8% in August. Interest rate swaps are now implying nearly 40% chance of another 25bps cut from the current historical low of 2.50% by RBA by the end of the year. The situation now makes the next batch of job data very important and further disappointment there would very likely push RBA for another cut in November meeting.

Elsewhere, Japan machine orders was flat mom in July versus expectation of 3.1% mom rise. The ECB will release monthly bulletin today while the eurozone will release industrial production. Canada will release new housing price index later today. The US will feature jobless claims and import price index.