EUR/GBP

In Spite Of Uninspiring Numbers: Traders pared back long dollar positions in the single currency leg to boost the euro slightly higher on the session.  Trading volume was a little to the downside as U.S. bond markets observed the Veteran's day holiday.  Subsequently, euro zone economic news was unimpressive with German consumer prices the sole report on the day.  Revealing that inflation was well contained, countering earlier rhetoric by policy makers, the monthly change in prices was kept unchanged for the month. On the annualized basis, the overall figure actually decreased to 2.3 percent, leaving little speculation for any interest rate hike materialization in the near future.

UK Inflation Expectations: Traders are looking ahead to Monday's report on producer prices in offering further suggestions that the Bank of England will leave the official repo rate at the current 4.50 percent.  Expected in the release, producer ouput prices are to have increased on continually higher raw material prices.  As a result, in saving the bottom line, producers are to have passed on the costs to the consumer, continuing the 2.4 percent rate of inflation.  

Technically Speaking: A touch of a long-term 73.6 fibo level at 0.6705 created a strong support level for the EURGBP pair to make a 4-month low before rebounding back to current levels.  Previous supprt at 0.6741 may not offer much topside resistance but the 23.6 fib on this chart coinciding with a 73.6 fib on a longer term chart makes for a sizable level at 0.6751.  

EUR/USD

The Grand Coalition: Today marked the first time a woman chancellor was elected to the German government as both political parties formally inked an agreement establishing a coalition government.  Alleviating some uncertainty as to the political situation in the Euro zone's largest economy, the formation of the government may add some unwanted pressure on the underlying spot as budget reform talk grew louder.  One of the main policies of the coalition involved tackling the country's budget deficit.  In order to accomplish this goal, policy makers have decided to raise taxes and lower public spending.  The legislation follows yesterday's mention of an increase in the 3 percent "wealth tax" and the VAT.  As a result, consumer spending looks to weaken further as consumers will be paying an increasing amount to the government and not on their own economy.  This now brings to light the possibility that Angela Merkel's previous platform will not come to fruition, dashing hopes of positive reform in the economy.

Technically Speaking: The Euro made a rather weak attempt to crawl out of its hole against the dollar in trading today.  A falling channel top at 1.1760 could spell trouble for a euro rally while a 23.6 fib reinforcing a range top at 1.1790 would bring dollar bids.  If the dollar reinstitutes its trend the 1.1670 will offer little resistance to the move.  However, a very long term 50.0 fib at 1.1642 could keep the pair in line.

USD/JPY

Self-Sustaining Growth: The release of third quarter GDP rallied some confidence in the Yen and Japanese economy this morning.  Beating expectations by expanding 1.7 percent in the three months ending in September, economic expansion is one less barrier to keep the BoJ from abondoning their ultra-loose monetary policy.  Futher sifting through the release provides another reason for yen bullishness: domestic consumption.  Over the period consumer spending and business investement contributed to growth while exports actually were a detriment.  With energy prices on the retreat and optimism ramping up, the island nation looks to be heading for another period of a Japanese driven growth rather than recieving money from abroad.

Technically Speaking: The unstoppable rally the dollar has had against the yen is once again face to face with another make or break level.  A three-year fib retracement places a 50.0 fib level smack in the pairs path at 118.41. Looking for support levels is quick work.  Multiple rising trendlines look are looking to contain an selloffs in the pair.  However, a two week rising trendline in conjuction with a 23.6 fib of the recent two week rally could be the straw that breaks the camels back on the way down.

Richard Lee is a Currency Strategist at FXCM.