USD/CHF
Dollar Bears Come Out Of Hibernation: Further dollar bearishness plagued the greenback during the session as positive factory order figures played into the hands of skeptics. Rising 2.5 percent on the month, U.S. factory orders were bolstered by increased orders of civilian aircraft. However, when excluding the volatile component, overall orders remained unchanged. This would be the fourth time in five months where there has been little to no growth in the figure and suggestive of nascent sluggishness. Coupled with yesterday's disappointing manufacturing activity report, sentiment is beginning to mount of an overall slowdown which may signal the end of the current tightening cycle. Already pricing in a 25 basis point rate hike in January, traders may not be so convinced of further rate hikes, prompting short term weakness.
Technically Speaking: Continuing the bearish momentum from yesterdays break of the previous consolidation, the USDCHF currency pair has rocketed through the last line of support at 1.2850 and looks to close below the support floor at 1.2771. As a result, further bearish momentum looks to continue in the longer term, but for now, the price action may be ripe for a small retracement before further downward pressure. First tests would be the 1.2800 round figure with the 1.2844 (23.6 percent fib level from the recent bear wave). Capping looks to hover 1.2912 (38.2 percent fib from the aforementioned wave).
USD/CAD
Data Aside, Commodities Drive Higher: Canadian dollar price action seemed unaffected by economic data as regional inflationary data was less than exemplary. Industrial product price for the month of November dipped 0.6 percent versus expectations of a milder dip by 0.5 percent. The raw material price index report fared the same declining 1.7 percent in the month. The data, suggestive that inflation remains rather tamed in the economy, may lead central bankers in considering leaving the current overnight rate at 3.25 percent. Policy makers began raising interest rates mid year in order to remain preventive against such forces. However, given the economy still churns ahead, as consumers remain thrift averse, Governor David Dodge remains vigilant and may raise interest rates one more time rather than being sorry. Subsequently, loonie demand looks to be bolstered by correlations with crude oil and fundamental aspects have led lots of speculative money to boost the front month contract higher above $63 a barrel.
Technically Speaking: In similar fashion, the downtrend continues from the previous textbook double top seen in the month of December. However, nearing a formidable floor at 1.1452, the current bear assault may be temporariliy halted. The first topside resistance resides at the 1.1500 figure and 1.1554 (61.8 percent fib from the December bear wave). Formidable barriers hover the 1.1425 figure (December 14th spike low).
AUD/USD
Copper Soars, Assists The Aussie: With no economic data, traders continue to bid the Australian major against the U.S. on a mildly dovish tone in yesterday's Fed meeting minutes. Although growth in the economy continues to be suggestive of a plateau, traders cannot deny the fact that the currency pair still offers a small carry. With U.S. Fed officials speculated to stop raising interest rates, the carry would still offer the most interest only trader a 1 percent differential. Price action looks to additionally be fueled by gains in metal based commodities. Notably, copper price continue to hover record highs, temporarily hitting $2.11 before retracing slightly in the U.S. session. With the economy a provider to the world's demand higher copper prices would definitely benefit exporters and hopefully contribute to further growth.
Technically Speaking: Breaking through resistance at 0.7453, the price action continues to look positively biased. However, before approaching the longer term trend line beginning in early 2005, short term momentum may be subject to consolidation prior to further upsides. Textbook Fibonacci levels are in place providing floors at 0.7453 (61.8 percent fib ffrom the two week bear wave) and 0.7412 (50 percent fib from the aforementioned wave).
Richard Lee is a Currency Strategist at FXCM.
Free Festival of Traders Videos
