GBP/USD
Fundamental Push: Data was rather disappointing given the most recent CBI Distributive Trades Survey and this morning's construction activity data. According to the CBI October figures, retail consideration remain weak as consumers are less and less likely to visit outlets. However, even though only 24 percent of retailers reported sales that were to the upside, the data is considerably more positive, bouncing back from the lowest levels in the 22-year history of the survey. Additionally pessimistic was the Chartered Institute of Purchasing and Supply report on construction activity in the economy. Declining from the previous month's figure, the release noted considerable slowdown in home construction among other factors. However, what bolstered pound interest was the fact that figures still remain relatively positive. Even though the CIPS October construction activity measure dipped, it remains suggestively expansionary, remaining above the 50 reference level. As a result, growth and expansion, although on the dip, remain founded at the moment.
Technically Speaking: The British major looks to rebound off of the 1.7623 intrasession low following the considerable break of the textbook head and shoulders formation while breaching counter fib levels from the weekly move and nascent channel resistance. Now consolidating above the 50 percent fib at 1.7754, further upside potential remains. However, considerations of a near term retracement to the 38.2 percent confluence at 1.7719/26 should be noted prior to such directional bias.
USD/CHF
Profit Takers: Simple profit taking fueled the decline in the currency pair as traders witnessed some major resistance at the 1.2900 figure. Rising from the 1.2700 bottom established last week, traders have pared back 200 pips in profit gains as stops below 1.2800 triggered an even sharper decline.
Roth Contribution: Sparking the selloff, Swiss National Bank Chairman Roth suggested near term rate hikes as the Swiss economy continues to grow and expand.
Stating that the current rate is inappropriate given the level of expansion, traders took the most recent statements to anticipate a rise as early as December. Additionally contributing to the notion has been a steady and consistent rise in the Swiss SMI index. The benchmark index has risen 13 years in a row and 82 percent of the time since 1987.
Technically Speaking: Forming a double top in early morning action, the major currency pair has broken through most fib lines and ultimately has found a temporary bottom at the 61.8 percent fib at 1.2780. Further downside, however, looks in store for the pair as selling momentum continues with the 78.6 percent fib at 1.2780 the next imminent test. If penetrated, support at 1.2696 may prove stronger, creating a double bottom last week.
GBP/JPY
Fundamental Push: Lending to continued yen weakness, two policy officials released statements expressing favoritism of further monetary easing by the Bank of Japan. Both Finance Minister Sadakazu Tanigaki and Chief Cabinet Secretary Shinzo Abe expressed that deflationary conditions continue to linger in the economy and as such the central bank should continue to remain in easing mode rather than consider premature hike interests. As a result, domestic investors look to continue their search for higher rates of return abroad, passing over their 1.5 percent domestic rates. With further investment outflows expected, and thus more yen selling interests, the comments look to extend the currency's loss in the near future.
Interest Watch: With economic reports, namely CIPS and CBI surveys, relatively positive given the dreary results, sentiment is now mounting further that interest rate cut considerations by central bankers may soon be an afterthought. Previously based on sluggish consumer consumption and sector activity, it seems that both may be establishing a bottom. As a result, unless fundamentals dip to the negative side or the region witnesses a prolonged period of stagnation, market sentiment may be justified in retaining high hopes of left alone rates.
Technically Speaking: Continuing on the medium term bullish wave, the cross bounced off of the channel floor before proceeding to the intrasession high. At this point, given the matching topside resistance, any further gains look to be capped at the current figure. Subsequently, a retracement would see a test of the 23.6 percent fib from the weekly move at 206.62. Any downside potential, given the range holds, will be tested a near term confluence of the 38.2 percent fib at 205.97 and channel support.
Richard Lee is a Currency Strategist at FXCM.
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