As we noted in our weekly piece, "The EUR/USD now finds itself at an interesting juncture. It has clearly made a rounded bottom with support at 1.2000 now well established. However the 1.2250 region represents major resistance and so far the pair has been unable to surmount it. Next week the US calendar is far more crowded than the European one and the tone of trading is likely to be set by US results. Most important of those will be the TICS numbers which will have to continue demonstrating healthy +$80 Billion surpluses to offset the massive Trade Deficits. Following TICS the traders will focus on the housing data to assure themselves that housing demand hasn't slowed materially. Overall this may be the pivotal week where the pair either breaks out above 1.2200 or retreats below 1.2000 once again.. ." As of tonight absent any meaningful European data the euro has runs into a wall of resistance at the 1.2170 level and given the fact that US capital markets are closed for Martin Luther King day the pair may well range trade between 1.2100-1.2140 for rest of the day.

On the other hand the Japanese economic calendar was quite busy tonight with both Industrial Production and CGPI reporting results. Industrial Production rose 3.4% on year over year basis hitting new record highs while CGPI showed the biggest rise in corporate inflation in over 16 years. None of the data was of much help to yen however, as the currency remained weak on the crosses especially against the Aussie and the euro and as a result the USD/JPY gained about 50 points on the session so far.  The selling of the yen at the 114.00 level may be motivated by new carry trade demand as market players reevaluate the likelihood of change in the Zero Rate Interest Rate policy from the Bank of Japan. Although Japanese economy continues to show good growth in the corporate sector, consumer spending still lags and until such time that it can demonstrate consistent expansion, the Japanese Central Bank may be reluctant to abandon its decade long ultra accommodative monetary policy. Thus the carry trade in the USD/JPY may not be over.

Boris Schlossberg is a Senior Currency Strategist at FXCM.