USD/CHF
Confirmed Growth Bolsters Greenback: Confirming earlier notions of growth in the world's largest economy, gross domestic product figures rose 3.8 percent in the quarter versus expectations of a 3.6 percent rise. Although bullish for the greenback, some experts are referring to the released figure as somewhat distorted by the effects of Hurricanes Katrina and Rita. Subsequently, the deflator, rose 3.1 percent, above consensus estimates for a rise of 2.8 percent.
Lower Consumer Confidence: Comparatively, to the optimistic data released earlier in the morning, dollar bulls saw some incremental downside pressure as the University of Michigan consumer sentiment survey dipped even further. The final release for the month, the survey printed a 74.2 reading and declined against consensus expectations of a 76.4 figure. Adding bearish undertones, speculation remains that consumers may be scaling back purchases, as the winter season approaches, in order to compensate for higher energy costs.
Technically Speaking: Vaulting off of the 1.2700 support mentioned in yesterday's report, the price action pushed through the first resistance test at 1.2793. Now hovering the level and consolidating, further moves higher look probable as the topside channel resistance has been formidably broken. Subsequently, the next barrier test is the 61.8 percent fib from the three session wave at 1.2853.
AUD/JPY
Risk Averse Paring: Traders pared back positioning in the carry trade favorite as a bout of risk aversion and profit selling ensued on the market with long term models contributing to most of the day's downward pressure. Additionally, with metal prices dipping slightly, players pushed the Aussie major bearishly lower with copper prices subsequently expected to decline in the near term. Nonetheless, market participants may reenter the long side given hawkish rhetoric from next week's Reserve Bank of Australia meeting.
Tepid Japanese Fundamentals: In light of risk averse players, Japanese data was to the downside as worker's household spending dipped 0.4 percent for the month after rising 3.2 percent in the previous month, suggesting sluggish consumer spending for the month. Additionally, Tokyo CPI continued to suggest deflationary conditions in the world's second largest economy as the figure dipped 0.3 percent for the month. Subsequently, industrial production was sluggish in the month, rising only 0.2 percent versus the 1.1 percent spike in August.
Technically Speaking: The underlying cross currency, looking to consolidate momentarily, broke through all three fib levels, the common theme on the day. As a result, residing on the 86.60 level, a break would see a test of the 86.30 low on October 24th with soft support at 86.50. Upside tests remain at the 61.8 fib level of 86.77 and 86.93 in the near term.
AUD/USD
Interest Rate Considerations: Much like we have been seeing over the course of the past few weeks, traders continue to be preoccupied by interest rates and carry trade potential. However, as mentioned above, risk averse players pared back long Aussie positions as sentiment remains strong of a stay on rates in Australia and a quickly narrowing spread. Although carry trade potential still remains strong in the underlying major, speculation may not reenter the foray for a little.
Political Factors and Interest Rates: With growth apparent in the world's largest economy, traders continue to speculate of rising interest rates in the United States. Additionally contributing to climbs in the underlying spot looked to be some alleviation of uncertainty after Supreme Court candidate Harriet Meirs' resignation and the indictment of Vice President's chief of staff, Lewis Libby. Adding some downward pressure in the previous week, resolution to both issues have lightened the load a little in order for dollar bulls to dominate, if only momentarily.
Technically Speaking: Crashing through all three fib levels from the three session move, the underlying currency looks to be consolidating after the intraday slide. Given the 0.7490 support floor stands, a test of the former support level at 0.7517 (61.8 percent fib) would be imminent. However, with a break below, a short slide to the 0.7470 figure would be probable with a test of the October 24th session low.
Richard Lee is a Currency Strategist at FXCM.
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