• GBP/USD 0.9%
• GBP/JPY 0.8%
• EUR/USD 0.8%

GBP/USD

Greenback Bidders Exit On Lower Figures: Traders bid the British pound higher as weak fundamental data for the U.S. spurred a session selloff.  Rising throughout the day, sterling pound bids increased as retail sales data and producer price figures came in lower than expectations.  With both pieces of data to the downside, there now exists a higher amount of speculation that policy makers will be shifting to a looser monetary policy in the near term.  Retail sales in the world's largest economy rose 0.7 percent against estimates of a 0.9 percent rise.  The figure was bolstered as consumers visibly spent more on automobiles and gasoline products rather than any other consumer good.  Excluding the auto component, the core figure rose an incremental 0.2 percent on the month.  Additionally, producer prices were suggestive that manufacturers are finding it increasingly difficult to pass on higher base costs to the consumer.  For the month, producer prices rose 0.9 percent while the core figure increased incrementally by 0.1. 

Technically Speaking: Tearing through former resistance at 1.7725 (marking a congestion area since Jan. 6th), the British Pound rallied just short of heavy resistance at 1.7800.  At this level, technical traders are confronted with a range high that has been obeyed since Sep. 26 as well as a falling trendline (beginning on Oct. 27).  With this level of backing, dollar bulls will defend this level tooth and nail while perhaps allowing it to falter to the three-month high at 1.7900 (Oct. 27th).  On the week's open, dollar bulls will try to reestablish control and push the beleaguered currency back within sight of 1.7550 (32.8 fib of Dec. 14th to 28th dollar rally) - that is if the rising trendchannel bottom gives way.

GBP/JPY

The Sun Sets On Japanese Data: Sterling bidding from the major currency spilled over into the GBPJPY currency cross pushing the pair higher on the day.  With carry traders still looming for opportune chances of re-entrance, today's session was exemplary.  Contributing to increasing momentum, Japanese economic data was rather disappointing as machine orders, indicative of exporting activity, was lower than expected.  In addition and more importantly, department store sales were indicative that domestic consumers remain hesitant.  For the month, store sales rose 2.1 percent, half the number from the previous month's.  Although the Eco-Watchers survey was reflective of improved conditions, it added little weight to the overall bearish yen undertones.

Technically Speaking: The liberally swinging GBPJPY pair has tested and rebounded off of the 201.25 level (50.0 fib of the Jan 17th to Dec 13th pound advancement).  While seemingly a clear break on the smaller time frame, it constitutes only tails on the daily charts, so its importance remains.  The steep over 200-pip rally has taken the pair 50 pips short of a confluence of resistance levels at 203.50/60 (A falling trend beginning Dec 19th as well as the 23.6 fib of the Dec 13th to Jan 11th Yen retracement).  If resistance at 203.50 should fade, a run towards the monthly spike high around 204.75 (Jan 4th) is likely to be in store.  If Yen bulls can cut the rally short, a return to 200.55 the three-month low spike low (Jan 12th) would be the most probable.

EUR/USD

Dollar Bearishness Re-enters: Mostly spurred by dollar bearishness, the Euro major rose against the greenback today as economic data was released relatively in line with earlier estimates.  Suggestive of inflation, both wholesale prices in Germany and consumer prices in France matched expectations and lent to the notion that inflation for the moment remains slightly higher, but tamed.  The day's reports added to comments yesterday by European Central Bank President Jean Claude Trichet that inflationary risks continue to be a concern for policy makers.  However, the uplift may be only temporary and regarded as squaring of dollar strength from Thursday.  With the dovish tone captured yesterday, plenty of downward pressure remains for the European single currency in the near term as rate hike speculation weakens.  Subsequently, gross domestic figures were released in line with expectations, rising 1.6 percent on the annualized comparison for the third quarter.  Although relatively low, the figure levitates above the 1.2 percent seen in the prior period.

Technically Speaking: After probing 1.2025 support (the 38.2 fib of the Dec 30th to Jan 6th Euro rally) Euro bulls responded by rallying their favored currency to within stones throw of major resistance on both the higher and lower time frames at 1.2175 (range high from Oct 27 to present).  The less likely scenario sees Euro bidding that would carry the EURUSD pair through this approaching level and leave 1.2230 (61.8 fib of the Sep 2nd to Nov 15th dollar rally) the next dollar-based resistance.   The more expected move from the market would be a return to the 1.2000 level (spike low of Jan 12th¬) with strong resistance around 1.1930/15 (61.8 fib of the Dec 30th to Jan 6th Euro rally and major consolidation area since July).

Richard Lee is a Currency Strategist at FXCM.