The yen sold off after  the release GDP for July to September quarter, but upon further reflection traders revised their bearish views and the slide in the currency was halted. The pair actually broke the 120 barrier in early Asian trade making a low of 119.94 as traders anticipated an upward revision of GDP numbers. The data however disappointed as the report registered a gain of 0.2% vs. consensus estimate of 0.6%. The GDP results were hampered by lower government spending and downwardly revised inventories. Nevertheless, the headline number  continued to show positive momentum in Japanese economy. In fact, growth during Apr-Jun was revised up to 1.2% on a quarter over quarter basis from 0.8%  previously reported indicating that growth was actually a very respectable 2.9% on yearly basis. This news halted further selling of the yen, as the FX market speculated that BOJ monetary tightening in 2006 will still take place despite tonight's softer data.

The news was not so kind in Europe however, where French Industrial Production experienced the largest decrease since 1999 dropping -2.5% vs. expectations of a rise of 0.2%. The plunge was precipitated by a decline in auto sales caused by higher oil prices and dour consumer sentiment. Given the fact that riots engulfed the country in November, next months data may not be much better. The euro responded by dropping back through the 1.1800 level but found support in the 1.1770s. Unless of U of Michigan data prints materially better than expected, further dollar strength may be limited as traders look to square their books ahead of the week-end.

Boris Schlossberg is a Senior Currency Strategist at FXCM.