The euro gave back some of last weeks gains in the first session of the week as profit taking and some top picking by speculative accounts drove the unit  below the 1.2100 figure in early European trade. On the economic front the Eurozone data printed generally positive results with German Trade Balance coming in at 13. 3 Billion versus expectations of 13.5 Billion euros. A surprising drop in exports to -1.4%  was the culprit for the decline, but the readings were skewed by smaller number of workdays in November and on an unadjusted basis exports actually rose 4.4% suggesting that the  lower euro continues to generate positive momentum for the region's industrial sector. Far more importantly, EZ Retail PMI expanded nicely to 52.2 from 50.7 the month prior suggesting that the export led recovery may be finally translating into firmer consumer demand as unemployment in Germany recedes from its post World War II highs. The data should be especially heartwarming to euro bulls serving as strong contrast to the unexpected drop in last week's German Retail Sales.

Meanwhile the yen continues its vicious carry trade liquidation cycle with USD/JPY dropping below the 114.00 figure in today's Asian session for the first time in nearly 3 months. Although Japanese capital markets were closed for holiday the action in FX was triggered by comments from Finance Minister Sadakazu Tanigaki who said that the moves in yen "are in line with fundamentals". The statement signaled to the market that the Japanese government has no plans to intervene to lower yen's value and allowed momentum players to short the pair with impunity. Although it is extremely tempting to call for a temporary bottom in the pair as USD/JPY has now had an uninterrupted fall of more than 700 points our proprietary internal positioning guide still shows that speculators are still trying to bottom pick this move with yen longs outnumbering dollar longs by nearly three to one margin. Until this imbalance in positioning improves, the USD/JPY is likely to move lower still despite its oversold status.

Boris Schlossberg is a Senior Currency Strategist at FXCM.