GBP/USD

Dollar Fundamentals Take Centerstage: Fueled by an ever widening US current account deficit traders pounded the dollar lower and bid sterling long positions on the day.  Topping the positive list, the underlying pair rose within a 160 pip range to crash through previous resistance at the 1.7400 figure.  Growing to $225 billion dollars, the monthly current account figure was bolstered by a continuing decline in exports as consumers in America continue to harp for energy and goods from China.  As a result, even as Fed officials further their momentary tightening bias, focus looks to be turning to the weak infrastructure as the overall deficit grows upwards of $800 billion for the year.  Looking forward, tomorrow's TIC or net foreign securities purchases will play an increasingly important role as traders scrutinize the data.  Should the figure be released less than expected, further downward momentum looks to be placed on the greenback as it becomes evident that the current deficit may not be sustained.  Just put things into perspective, this is the seventh time in eight months that the deficit has widened with the amount now representing a record 7 percent of overall gross domestic product, comparable to the 8 percent seen in New Zealand.

Rumorville: Bids continue to prop the current price action as buying interest resides at the 1.7410 figure with deeper interest at the 1.7415 level.  Offers and selling pressure comparably hover the even 1.7500 handle with stops shortly above at 1.7510.

USD/JPY

No Bank Intervention Exacerbates Dollar Fall: Carry liquidation overtook the USDJPY currency pair on the day as it becomes increasingly clear that the near term may hold a lot of negativity for the dollar.  With the infrastructure now entering center stage, we may see a reprise of 2003/2004 action as traders side with the Japanese yen denomination.  Increasing market sentiment of no central bank intervention looks to exacerbate the pair's downside following the Bank of Japan's hawkish monetary assessment.  Already declaring a shift to loose monetary policy, participants are calling for a possible move in the next meeting in April as conditions rapidly improve in the world's second largest economy.  Consumer spending, although recently negative, has been boosted overall as export remain strong contributing to the overall output.  This shift in monetary policy and thus long hold on the favorite carry of last year is bound to spark a sharp reversal.  Not adding to positive sentiment was the decline seen in Tokyo department store sales.  Rising in January at a 0.1 percent annualized pace, the figure dropped 0.9 percent in the month of February.  Although a noted dip, larger dips in household products and furniture clearly offset increases in food and clothing purchases.

Rumorville: Further selling prevails in the market with continued offers on a pullback from the day's actions.  Selling pressure look to be initiated in the 117.70/80 region with further downside on the 118 handle.  Bidding looks thin and comparably offset at any level heading into the asian session.

EUR/JPY

Carry Liquidation: In similar fashion, carry liquidation hit the EURJPY currency cross bringing the pair down the second most in the market.  Taking the pair for a 113 pip ride, traders bid the pair lower on a worse than expected German ZEW survey.  Expected to print a 71, sentiment actually dipped in the month to below the 69.8  seen in February.  The actual figure dipped to 63.4.  The new and subsequently lower number depresses the rather positive data that has been released in recent months, bolstering the notion of further rate hikes by the European Central Bank.  However, notable was the uptick in the current conditions component as the gauge rose from February's -19.5 reading to a -8.4 print.  Aside from attention being focused on the upcoming TIC data, Japanese machine tool orders may lend to further downside for the pair as it is representative of the economy's growing export sector.

Richard Lee is a Currency Strategist at FXCM.