Aussie & NZ dollars trim losses, still on defensive

WELLINGTON/SYDNEY, Oct 9 (Reuters) - The Australian and NewZealand dollars recovered a bit of ground on Tuesday asinvestors took profits on short positions built against the euroand sterling, though the mood remained defensive.

* Aussie up at $1.0231, from $1.0196 early, boostedby short-covering following a fall to $1.0149 on Monday, itsweakest since mid-July.

* Traders cite model funds buying in the past 24 hours withreal money investors ready to sell rallies towards $1.0250/80.

* Aussie still looking vulnerable, with daily moving averagestudies pointing lower. A dealer said only a break above $1.0280might suggest a stronger recovery under way. Support found at$1.0150, an Oct 8 low.

* NZ dollar nudges up around a quarter of a cent to$0.8210 on some buying and gains on cross rates, after hitting aone-month low of $0.8150 overnight.

* Kiwi still likely to struggle to achieve any sustainedmove higher. Sellers seen lined around 10-day moving average at$0.8240 and then 20-DMA at $0.8251. Support at Monday's low at$0.8150 and below that Sept 10's high of $0.8134.

* Aussie has fallen around 1.4 pct so far this month vs itsU.S. counterpart and 2.5 pct against the euro, weighed by a ratecut by the Reserve Bank of Australia (RBA) last week and theprospect of more easing on a cloudy Chinese outlook.

* Interbank futures pricing shows a 64 pct chanceof another quarter of a point cut next month with OIS markets

showing nearly 100 bps worth of easing over the next 12months.

* Focus on a speech by RBA Deputy Governor Philip Lowe at0140 GMT on "The Labour Market, Structural Change and RecentEconomic Developments".

* It may address the unusually sharp drop in theparticipation rate seen in the last year which has helped keepunemployment low at 5.1 pct even though jobs growth has beensluggish.

* Australian business conditions weakened in September asretailers and wholesalers suffered from slack demand, whileinflationary pressures remained subdued, adding to the case forfurther cuts in interest rates.

* Antipodeans trim hefty losses against euro. Euro atA$1.2692 , having climbed to a four-month high ofA$1.2824 last week, and NZ$1.5810 , off a peak ofNZ$1.5931.

* The Antipodeans claw back lost ground against the yen,with the Aussie last at 80.07 yen AUDJPY=R>, having slipped toan overnight low of 79.34 yen, lowest since June 28. Kiwibounces back to 64.23 yen from a three-week low of63.49 yen .

* New Zealand data offers a mixed but slowing outlook.Closely followed think tank's quarterly survey of businessconfidence headline moves back into black but the componentspoint to a slowing in growth in the second half of the year.

* A partial NZ retail sales indicator shows a dip after theprevious month's stellar rise, with the rate of growth evidentearlier this year starting to slow.

* NZ government bonds turn flat after openingfirmness.

* Australian government bond futures also softer withthree-year contract down 0.010 points at 97.630, as wasthe 10-year contract at 97.015.

((Australia/New Zealand bureaux)(+61 2 9373 1800/+64 4 8027980))