• USD/CHF  0.8%
• EUR/JPY  -0.7%
• EUR/USD  -0.8%

USD/CHF

Narrowed Trade Deficit Adds To String Of Positive Dollar Data: Adding to a string of positive economic data for the world's largest economy, the U.S. trade deficit narrowed in the month of November.  Attributed to record exports and lower crude and energy prices, the previously recorded deficit of $68.9 billion narrowed to $64.2 billion.  Exports for the month increased to a record $109.3 billion with large additions notably in consumer goods including civilian aircrafts.  Additionally, jobless claims rose slightly less than expected by 17,000 to 309,000.  The increase was released after the report showed claims dropping to a revised 292,000, a five year low in the previous week.  The smaller deficit, although lending some looming concern that the level will stick, does alleviate some fears that the trade deficit would widen to record another all time high.  Now, coupled with relatively optimistic figures across the board, there seems to be ample data catering to the dollar bull in expecting further tightening bias in the near term.  Subsequently, today's results overrided speculation of higher interest rate in the Swiss region as sparked by comments from SNB Chairman Roth.

Technically Speaking: Four hours and over a hundred pips, the dollar rally against the Swiss Franc has shown that dollar bulls are not ready to give in just yet.  Since setting its three-month low on Friday, the USDCHF has trended quietly higher; that is until today's strong rally.  After breaking short-term support at 1.2750, momentum was thrown behind the dollar push.  A confluence of fib levels finally took the steam behind the run however around 1.2875/85.  The 38.2 fib of the Sep. 5th to Nov. 16th dollar met with the Dec. 30th to Jan. 6th 38.2 fib to put the full breaks on dollar bids.  Support is murky, with only the 1.2670, three-month low the only definite level.  Taking out 1.2875/85 resistance would probably result in a strong continuation in the dollar advancement with the 1.2995 congestion level the next area of resistance to test.

EUR/JPY

European Central Bank Keeps Rates Steady: Driven lower, the EURJPY cross pair took a dip on the day as the European Central Bank elected to leave rates at the current 2.25 percent.  Market participants had been expecting at least a near term consideration of a 25 basis point rate hike as the fundamental infrastructure of the region has been improving as of late.  Recent German factory orders and consumer confidence reports have been an example of the good feel vibes that have been exuding from the region.  Additionally, adding to the Japanese yen leg, traders will be looking for a higher number in the upcoming machine tool orders report out of Japan.  Although widely known for its volatility, the machine order figure may be suggestive that the export market is continuing to contribute to the overall economy in light of a dip in consumer spending.

Technically Speaking: Three attempts to pass surpass support at the 137.60 level spread out over three months, have finally paid off.  After gaining a full head of steam early this morning, Yen bidding pushed the 166 pips to break the level and to only be plugged 50 pips beyond.  Support from the 50.0 fib of the Jun. 23rd to Dec. 12th Euro run at 137.10 stopped the descent dead in its tracks.  While the pair has drifted higher since testing this new support level, the broken 137.60 support level has now become near resistance and 138.75 the second line of Yen defense.  Below the newly formed support, there is little in the way of a clear level, but congestion around 135.00 will provide a foothold for Euro bulls to jump from.

EUR/USD

Dovish Statements Down Euro: Keeping rates steady at 2.25 percent, traders were disappointed as European Central Bank President Jean Claude Trichet warned that there were near term risks to European growth and removed the “vigilant” portion seen in previous statements.  Slightly less hawkish than market participants had anticipated, traders are now siding with the fact that rates won't be moving anywhere in the month of March as previously had been expected.  Even with improved economic fundamentals, the subsequent statement looks to add to downside speculation for the major currency, keeping the spot price against the U.S. dollar in the current range.

Technically Speaking: Only nine trading days into the New Year and already the EURUSD has run two strong rallies.  The recent 159-rally in the dollar favor's was brought to a halt to a halt on the 38.2 fib of the Sep. 2nd to Nov. 15th dollar run at 1.2004, which also acts as a psychological barrier for many traders giving weight to the rounded numbers.  If the 1.2000 level is taken, by dollar bullish sentiment, congestion another 100 pips down at 1.1900 will be the next round of support for slipping Euro bulls.  With only slight resistance at 1.2040 provided by the week's low, a move to the upside is technically more plausible with an eventual move to the swings high at 1.2165 the likely target for bulls.

Richard Lee is a Currency Strategist at FXCM.