GBP/USD
To Cut Or Not To Cut: Against the U.S. currency, the British pound made a concerted effort to climb higher earlier on in light of confirmed strength by the world's largest economy. According to the Commerce Department, U.S. gross domestic product rose better than expected in addition to higher consumer spending figures and manufacturing activity. All dollar bullish, optimism derived from the data quickly fell to the wayside as comments by the newest Monetary Policy Committee member David Walton stated to the Times that inflationary pressures could indeed remain in the region as growth potentially recovers. With consumers adjusting to inflationary pressure, mostly attributed to higher energy prices, spending could indeed tick up as housing valuations have steadied from previous declines. In this situation, Bank of England policy makers may not be so ready to adjust rates either to the down or upside.
Nonetheless, today's GfK consumer survey results still paint a clouded picture as sentiment remains at a negative 8 reading, a two and a half year low for the survey.
Technically Speaking: Bouncing off of 1.7161 (61.8 percent fib from the interday move), sparked by a morning star formation, the pound sterling has made a considerable climb higher through subsequent fib levels to hit the session high just below the 1.7350 ceiling. Slightly retraced going into Asia, consolidation looks to form with further upside potential present. A breach above the 7350 figure would lead to a climb higher with a failure forming a textbook double top. Subsequently, floors would hold at previous levels with the first signs of capping at 1.7111.
GBP/JPY
Weaker Earnings, Thin Spending: Notions of a narrowed rate cut scenario helped the sterling higher against the crosses as well in the session. Tossing aside the worse than expected consumer sentiment survey, traders highlighted rather negative data from the world's second largest economy. According to preliminary report, for the month of October, labor cash earnings dropped from the previous 0.8 rise. Increasing only 0.5 percent, the figure is considerably lower than earlier estimates of 0.7 percent and sparks some concern over the viability of current consumer demand.
Although experts believe that exports may remain strong to underpin the economy for a 2.4 percent showing by year end, consumer weakness may actually take away when all is said and done. Subsequently, overtime earnings dipped 0.1 percent compared to a 0.4 percent rise in the previous month. Comparatively balancing, construction orders remained concrete, rising 0.6 percent.
Technically Speaking: Spiking through consolidation at 205.50 (50 percent fib from the weekly move), the underlying cross looks to have run out of steam. Sharply producing a doji candle, the nascent formation of an evening star lends to potential near term downside for the cross as trader pare back gains from the enormous move. As a result, the first floor on the way down would be at 206.58 (23.6 percent fib) and 205.99 (38.2 percent fib).
Although upside potential is a possibility, bulls' momentum may be short lived just below the 208 previously tested ceiling.
GBP/CHF
Narrowing Rate Expectations: Another cross subject to the rise in the pound leg, the GBPCHF currency pair moved higher as traders additionally sold the Swissie on waning anticipation of previously expected monetary tightening come December. Earlier in the month, SNB Chairman Roth suggested at finally lifting the national interest rate of 0.75 percent to compensate for rising growth in the nation and inflationary pressures. Economists and market participants alike estimated that 50 basis points were not a foregone reality for the year's last meeting in November. However, with today's consumer prices figures below expectations, sentiment has now been tempered a notch with traders now expecting nothing more than a 25 basis point hike. Consumer prices declined in the month of November after jumping0.9 percent in the previous month. Economists had anticipated a much smaller dip by 0.2 percent.
Technically Speaking: Already retraced back to 2.2725 (23.6 percent fib level from the intraday move), further upside looks to be in the cards for the GBPCHF pair. Gaining momentum off of the longer term double bottom, retests of the session high look probable with the first floor considerably lower at 2.2683.
Richard Lee is a Currency Strategist at FXCM.
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