The Japanese yen once again set 27-month lows against the dollar on the back of worse than expected  Retail Trade numbers. USD/JPY reached a high of 119.96 - just a whisker away from the psychologically critical 120.00 level - as Retail Trade report for October registered a decline of -0.3% versus projections of a 1.0% gain.   Supermarket sales slipped the most, dropping -5.6% on a year over year basis.  All of this dour data offers provided no solace for yen longs. Clearly, higher oil prices have pinched the Japanese consumer and the country remains in the grip of deflation suggesting that the ultra accommodative zero rate interest policy  will not be lifted any time soon. As a result the yen remains the greatest victim of the carry trade and the break of the 120.00 barrier appears to be just a matter of time.  One source of hope for yen bulls may be tomorrow's  Employment and Workers Household data both of which are expected to show an improvement from the period prior. If the recent growth in the Japanese corporate sector can  filter down to the Japanese consumer the yen may  finally catch a bid as speculators will begin to unwind the carry trade. However until such time comes,  yen longs remain vulnerable.

The euro too tested support in early European session with the pair dropping below the 1.1700 figure to reach 1.1680. Once there however, the sellers ran out of steam and the EUR/USD rallied  back to Friday's New York close at 1.1715. With no major data on the calendar, trading was dominated by technical considerations and moderate bids from European Central Banks finding value in the euro at these levels. As we've been noting for more than a week, the euro is grossly oversold and as such may not  decline much further. However, until the EZ data shows marked improvement and traders become convinced that the  ECB tightening process will not be just a one-off affair, the single currency  is unlikely to sustain any rally. The only other hope for  euro bulls is that US data produces major negative surprises, in which case the euro will revert to its typical role as the primary anti-dollar proxy. With the calendar chuck full of both Euro-zone and US economic  data, the markets will have plenty of news to drive  trading this week.

Boris Schlossberg is a Senior Currency Strategist at FXCM.