USD/CHF
Federal Reserve Push: Speaking today before Congress' Joint Economic Committee, Federal Reserve Chairman Alan Greenspan delighted dollar bulls with his testimony on the current condition of the world's largest economy.
Stating that economic fundamentals remain "firm" the Fed chief, three months before he leaves office, added that policy makers will remain vigilant of inflationary pressures. However, earlier in the testimony, Greenspan did caution Congress on the enormous budget deficit that looms over the economy. For the current year, government officials have produced a $319 billion budget deficit. Although the figure is an improvement on last year's deficit, it is still recognized as the third largest on record. He also added that a wave of baby boomers would ultimately place unwanted strain on the resources. Nonetheless, traders took the former comments as further indication that interest rates are set to continually rise.
Technically Speaking: Finding major resistance at the confluence of the 38.2 percent fib level from the monthly move and the upper channel trendline, the underlying major consolidates going into the Asian session. With the earlier momentum move higher, the currency pair ripe for a retracement with probable floors at the 50 percent fib at 1.2876. Further downside moves likely will be capped by the 61.8 at 1.2828.
EUR/JPY
Dreaming Of A Hawk: Euro bulls were somewhat surprised today as they anticipated further hawkish comments by European Central Bank President Jean Claude Trichet. Let alone the fact that policy makers kept interest rates at the current 2 percent, a six decade low, Trichet noted that current monetary policy remained "appropriate." However, subsequently, he noted that risks to price stability are increasing and that the central bank could move at any time. Coupled with manufacturing activity reports that were slightly above estimates, traders pared back euro positions as the likelihood of rate increases, namely in December, remains thin at best.
Profit Taking And Repatriation: Further repatriation plagued the euro single currency major in the session as corporations continued previous conversions that led dollar strength a week ago. Additionally contributing to the downside, profit taking ensued as the EURJPY cross approached the 141.00 figure. Helping along the selling, major Japanese exporters were rumored to be selling on the way down.
Technically Speaking: After topping off at the 141.18 intrasession high, the EURJPY cross is performing in line with the longer term established channel dating back past the beginning of the month. Subsequently breaking through the 23.6 percent fib at 140.41, the cross is consolidating momentarily at the 38.2 percent fib at 139.94. Barring deviation from the overall parameters, price action should have continued momentum to the downside. However, selling pressure looks to abate at the 50 percent fib as a confluence is readily forming.
CHF/JPY
Further Notions Of Profit Taking: An extension of the underlying major, CHFJPY took a beating as upbeat interest rate statements from Chairman Greenspan coupled with profit taking on subsequent JPY cross currency pairs pushed prices down. With positions pared in both GBPJPY and EURJPY positions, it's only natural that the CHFJPY pair was next.
Swiss Inflation Creep: Bolstering earlier statements by Swiss National Bank President Roth, Swiss consumer prices rose in the month of October. Expected to rise 0.6 percent, actual figures were considerably higher, jumping 0.9 percent compared to a 0.4 rise in the previous month. This now brings the annualized comparison to 1.3 percent. As a result of the higher figure, future speculation may now surround the possibility of the SNB following suit in potentially raising interest rates from the 0.75 percent that it currently resides at.
Technically Speaking: In similar fashion to the EURJPY cross, the CHFJPY has been confined in an upward rising channel. Crashing through the 23.6 percent fib at 90.94, the pair is hovering the 38.2 percent at 90.62. Further breach at the current floor is expected with downside momentum capped at the nascent confluence of the lower trendline and 50 fib.
Richard Lee is a Currency Strategist at FXCM.
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