• GBP/USD +0.9%
• EUR/USD +1.4%
• USD/CHF -1.5%

GBP/USD

Dollar Easing Bolsters Sterling Favortism: In light of comments by Federal Reserve President William Poole that 1 to 2 more rate increases by the Federal Reserve would be â�,��"sensibleâ�,�, traders sided with the British Pound in early morning action.  Seen mostly as a technical break to the upside, the move was mildly exacerbated as leading indicators for the month of December dipped in the United States.  Suggestive of slower growth, the report presented a sluggish outlook for the U.S. single currency as dollar bulls look to contend with a widening trade deficit, a halt in interest rates and slower growth in the coming year.  As a result, bullish pound focus will be emphasized on tomorrowâ�,��"�s release of the monthly CBI industrial trends survey.  Bouncing from historic lows in the months of October and November, the figure is projected to rise again, reflective of an uptick in manufacturing activity.  Ultimately, coupled with a current bottom in housing prices and stable consumer confidence, higher production activity will lend to further sentiment that rate cuts will be unnecessary in the near term.

Technically Speaking: Breaking through recent consolidation, established by 1.7800 and 1.7500 barriers, sterling bulls piled bids on bolstering the onslaught of the 1.7879 high.  However, with momentum petering out, a probable retracement looks to bring the price action to previous support/resistance levels.  First goal eyed by bears, the round 1.7800 figure.  Posing previous ceilings, the figure coincides with the 23.6% fib from the 1.7526-1.7879 advance.  Downside capping looks to take place at the 38.2% fib, site of the hourly spike low 1.7746.   Confirming near term declines is the death cross formation in the Stochastic.

Rumorville: Bids are looking to take place at key points of retracements as bulls continue to search for opportunities at 1.7825 and 1.7780/85.  Heavier bidding looks to follow below levels at the 1.7725/30 area.   Comparatively, offers look heavy at 1.7905, the October 17th high, with even heavier interest at 1.7945, the 61.8% fib from the 1.8500-1.705 decline.

EUR/USD

Further Tightening Suggestions Underpin Euro: More jawboning surrounding inflation acceleration strengthened the euro single currency to break the current consolidation that has been witnessed over the past two weeks.  Earlier in the European trading session, comments by Chief Economist Otmar Issing fell in line with previous statements by Lorenzo Bini Smaghi and Christian Noyer, all voting members of the European Central Bank, that higher oil prices would ultimately spur price increases in the region.  As a result, Issing additionally suggested that although it was earlier stated that the recent rate increase would not be the beginning of a series, continued tightening may be necessary in controlling rampant inflation in the Euro zone, detrimental to rising growth.  With futures traders siding with a likely narrowing yield spread between U.S. dollar denominations and euro based assets, sentiment is likely to begin its much anticipated shift to euro bullishness. 

Technically Speaking: Penetrating upside resistance at the 1.2200 figure, the underlying spot has decidedly taken a direction after two weeks of prototypical consolidation.  With bulls making an over hundred pip move in the session, the major looks ripe for a downside retracement prior to any further moves higher.  Profit taking and squaring should lead to a first test of 1.2250 (23.6% fib from the 1.2052-1.2308 advance), after susceptible breaks of the 10 and 20 hour moving averages.  Downside pressures looks to be capped at 1.2202 (38.2% fib from the aforementioned advance) with the floor holding steady with a previous bullish flag holding the fort.

Rumorville: In similar fashion to the British pound bids, bulls look to take advantage of intraday declines off of the rise.  As a result, bids look to reside at 1.2265 with heavier bidding at 1.2225 and 1.2180.  Comparatively, strong offers are hovering 1.234, the 38.2% fib of the 1.3480-1.1640 decline with capping at 1.2445.

USD/CHF

Textbook Crows Lead To The Downside: Consolidating and heading into the Asian session, a textbook three black crows formation lends to further downside in the major currency.  Hovering the 1.2561 figure, the 10 and 20 hour moving averages pose as the first level of defense for the Swiss bear with further upside barriers at the 23.6 percent fib level of the recent decline at 1.2638.  Upside momentum looks to be capped, should the aforementioned barrier be broken, at the 38.2% fib at 1.2685 as the site serves as previous consolidation.  Breaking though 4-month lows, bears look to continue to suppress the major to 1.2450 before considering a directional change.

Rumorville: Strong bids look to buoy the underlying in the 1.2520/25 area with further support at 1.2470/75 and corresponding stops at 1.2450.  Last legs of support hover the 1.2385 figure, the 50% fib from the 1.1480-1.3290 advance.  Subsequent offers are seen in rallies at 1.2615 with upside capping at the 1.2670/75 region.

Richard Lee is a Currency Strategist at FXCM.