USD/JPY
Dollar Bulls Charge Back: Dollar strength stemmed from a better than expected consumer confidence report and durable goods orders data as traders reinitiated long greenback positions. Reversing yesterday's decline, the price action was contrary to rather upbeat data in the Japanese economy and suggestive that interest rates remain the overall concern of the market.
Uptick Data In Japan: Industrial production disappointed to the downside as the world's second largest economy experienced a measly 0.6 percent rise in output for the month. This now places the annualized figure at 3 percent, considerably lower than economists had previously expected. However, workers' household spending, remained buoyant, rising 1.2 percent compared to expectations of a 0.5 percent climb. On the flip side of the money supply cycle, firms remained optimistic of future and current conditions. The small business confidence report for the month of November ticked slightly higher to 50.9 compared to the earlier month's print of 50.
Technically Speaking: Breaking out for a second time in two weeks, the price action looks ripe for further upside as the flag formation fails to hold. Bouncing off of 118.45 (50% fib from the monthly move), the current bull run looks to be tested at the 120 psychologial resistance, a level which held last week on a push higher. A failure at the 120 may result in a full retrace to the 50 fib once again with a break above suggestive of an imminent test of 121.
GBP/USD
Where's The Inflation: With housing data suggesting a further bottom and credit data mostly inline, today's retrace resembles nothing short of seling into rallies as bears reinitiated short positions following the temporary spike. This theme looks to persist over the next week or so continuing on speculation that the Bank of England will likely opt to cut the repurchase rate in the near future as consumer spending remains weak. Readers will also remember the lowered growth forecasts published by policy makers previously along with a more tepid inflationary picture that has contributed extensively to the downward pressure. As a result, with the interest rate differential imminently narrowed further selling pressure is expected until an upside catalyst is presented in the form of either an uptick in spending or sparks of inflationary pressure.
Technically Speaking: Previously bouncing off of the 1.7055 figure, the British pound major has tested significant resistance at the 38.2 percent fib level form the most recent bear wave. Since then, bears have pounded the sterling to break below 1.7221 (23.6% fib level from the monthly move) with an imminent retest of the aforementioned floor.
NZD/USD
Commodities Higher: Although spurred by the previously mentioned upbeat economic data in the U.S., the overall upward momentum for the Kiwi dollar major currency remains intact. Bolstering the notion has been recently soaring commodity prices. Platinum contracts traded slightly above the $1,000 mark, a 25 year high, as gold bullion additionally broke through its ceiling at $500, if only briefly. With base metals rising higher and higher, copper is now 45 percent higher compared to a year ago, the commodity bloc currencies look to be the prime beneficiaries. Additionally, potential further increases in the region's overnight cash rate look to boost the currency in the short run. With inflationary pressures still looming in the economy, central bankers look to prevent the forecasted 3.1 percent pressure going into 2006. Ultimately, this may be a short retrace in an otherwise larger upward rise.
Technically Speaking: Retracing afer the overall bounce off of the 0.6850 support figure, the single currency is consolidating on 0.6993 (23.6% fib level from the monthly move) and looks ripe for further upside potential. The less than shapely spinning top lends to further notions of a push higher as the current selling pressure dissipates. As a result, a break below at this current rate would signal a partial retracement to the 0.6944 level (38.2% fib level), inline with previous consolidation.
Richard Lee is a Currency Strategist at FXCM.
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