USD/CAD
Loonie Sellers Abound: Bears pounded the Canadian dollar today, as economic data was less than exemplary for the world's eighth largest economy. On the docket was the Ivey purchasing managers index. According to the monthly release on manufacturer purchasing, activity declined to a reading of 48.3 compared to expectations of a 62.7 print. The lower figure suggested that expansion may not be as formidable as previously expected and may lead to considerations of a no move by Bank of Canada officials. Even if Governor David Dodge remains steadfast in his preventive nature, he and fellow policy makers cannot ignore the signs of sluggishness. As a result, speculation may now be running thin of a rate past 3.25 percent in the first quarter as inflationary pressures additionally look to be weak.
Technically Speaking: Continuing off of the bottom of the 1.1454 support floor, the currency pair soared through Fibonacci levels. Similar to the EURCAD cross action, the price is ripe for a retracement with the first floor at 1.1638 (61.8 percent fib level from the two week bear wave). Any penetration lower should see major capping at 1.1569 (23.6 percent fib from the aforementioned wave). Upside potential rests on the strength of the bulls as current resistance strength resides in the upper trendline over the past week at 1.1650.
EUR/CAD
Canadian Bears Pounce, Favors Euro Leg: Following momentum off of the USDCAD major currency pair, the EURCAD currency cross was bid higher on the day as economic data pushed loonie bulls out of the picture. Contributing to the cross bidding looked to be positive factory orders from Germany. Orders rose 1.7 percent against an expected decline of 0.1 percent. On an annualized basis, this now raises the figure to a gain of 13.5 percent. With exports strong, sentiment is now leaning towards a potential spillover into consumer spending and improved confidence so as to entertain the notion of higher interest rates. However, still hovering over the region are high unemployment rates and a countering lower confidence report this morning. Nonetheless, with service manufacturing activity rising on the monthly comparison, hope is still driving the euro single currency against the Canadian dollar.
Technicallly Speaking: Breaking through downtrend consolidation, the EURCAD broke through the 1.3950 resistance and pushed higher meeting formidable barriers at the 1.4100j psychological handle. As a result, with such a momentous move, the cross looks to consolidate and break to the low side testing the 1.4052 (23.6 percent fib level from the intraday move) figure with ease. Any downside looks to be capped at 1.4016 (38.2 percent fib level and intraday spike low).
GBP/JPY
Cross Under Pressure: Choppy action for the currency cross as traders bid the British pound lower in light of optimistic data on the month. For December, according to the Chartered Institute of Purchasing and Supply, services activity accelerated in the U.K. economy. Specifically in telecommunications and information technology, the uptick lends to nascent optimism that policy makers will forego the earlier anticipated repurchase rate cuts and leave rates at the current 4.5 percent. However, with consumer spending still weak and manufacturing just on the turnaround, bullish sentiment is shaky. Interest rate futures are now 5 basis points higher pushing the implied higher to 4.47 percent. Nonetheless, today's speculation of potential interest rate hikes in the Euro zone look to be driving the pair on the session but may ultimately return to fundamentals tomorrow.
Technically Speaking: Breaking out of the triangle consolidation seen over the past week, the price action is currently consolidative at 203.35 (the 61.8 percent fib from the intersession bull move). Although the currency cross looks to test support at the 203 figure, further upside potential exists for the cross as carry traders reenter tomorrow's session, albeit additionally given a prevented break of support. Intial ceilings reside at 203.64 (50 percent fib from the aforementioned move) and 203.93 (38.2 percent fib).
Richard Lee is a Currency Strategist at FXCM.
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