EUR/USD
In Line Economic Data: Data was relatively in line with earlier estimates across the board with most of the figures stemming from the region's largest economy, Germany. Gross domestic product was reported to have expanded similar to last quarter's figures at a 0.6 percent rate. However, notably in the release, there were upticks in key components that may increase speculation of interest rates as the economy looks to make a full turn around. First and foremost, exports from the country rose 4.7 percent, considerably higher than the 3.3 percent expected in the quarter. With exports higher than the 4.4 percent rise in imports, the trade balance additionally rose to a surplus of 1.16 billion euros as the previous month's figures were revised lower to 1.15 billion. Subsequently, suggestive of optimistm up ahead, equipment and construction investment rose. Rising 0.6 percent in the previoius period, the equipment figure soared 3.8 percent as construction climbed 1.1 percent. The relevance of the figures lies in the fact that they remain a testament of the potential turnaround that may be witnessed in the region given the current interest rate level. With a rate increase suggested in statements issued by central bank President Trichet, the region may face financial difficulty lending subject to ill effects in the longer term. Nonetheless, speculation will further mount on expansive numbers as these.
Technically Speaking: Finding support at 1.1700, the single currency has soared above to break through 1.1800, a figure not seen in more than two weeks. Approaching the 38.2 percent fib level from the monthly move, a test seems imminent as before. However, given the thin volume that has dominated the markets as we head into the holiday, a penetration above would not seem a foregone conclusion. Downside floors would not be seen until the aforementioned support or the 1.1642 low.
USD/CAD
More Central Bank Implications: Still bent on central bank rates, traders placed strength behind the loonie on evidence that inflationary pressures remains on the up and up, albeit mildly, in the world's eighth largest economy. On an annualized basis the figure rose 2.6 percent against expectations of 3 percent. Falling short of the consensus expectations, the figure still remains considerably above the central bank's benchmark target. As a result, speculation remains strong that interest rates will continue their upward path when Bank of Canada policy officials meet one more time before the new year. Additionally spurring the currency's strength, commodity prices rose once again on the session. Gold especially rose to breach 18 year highs and inch ever closer to the $500 resistance level. Crude oil prices mimicked the bullion push as traders bid the contract higher on further speculation of a Northeastern winter snap. Weather forecasts are strong for a cold and blustery Thankgiving with a sprinkling of snow.
Technically Speaking: Crashing through the Fibonacci levels, bleeding in the USDCAD currency pair looks to be temporariliy plugged by the 78.6 percent fib level at 1.1712. Plenty of upside still remains as the price action now hovers the bottomside trendline and may be suggestive of a turn around in the currency. A penetration of the confluence would definitely signal further downside, potentially testing the low below 1.1600. Upside swings would see a retest of the broken fib levels.
USD/CHF
FOMC Flop: The dollar took an afternoon beating as Federal Reserve policy officials released a slightly more dovish tone in the meeting minutes of the November 1st decision. Raising rates a 12th time to 4 percent, policy officials turned the focus from inflation to upside risks of continual hikes. Additionally, policy makers noted that further rate decisions may be "increasingly sensitive to incoming economic data." Traders bent on rising interest rates in the world's largest economy had second thoughts and pared back positions shortly following the statements. Leading to an enormous slide, coupled with thin volume on the day, further data may be needed to confirm such suggestions before a new trend emerges.
Technically Speaking: Hitting considerable resistance at 1.3250, price action retraced back to the 23.6 percent fib level at 1.3149. Crashing through the support floor, further downside looks imminent, given a failure to hold at 1.3064 with capping not seen till the 61.8 percent fib level. Upside action looks to be capped by the 1.3283 resistance.
Richard Lee is a Currency Strategist at FXCM.
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