US Dollar
For those traders who have cut out early for the holiday, they have missed out on a strong dollar rally.  In the past three sessions, the dollar has rallied 210 points against the euro, 195 points against the pound and 135 points against the Japanese yen.  Fridayââ,¬â"¢s addition to these respectable returns was without doubt, but the fundamentals behind the advance were. From the onset of the New York session, the dollar was hit by the closely watched November CPI figures. Every one of the various measurements of consumer inflation missed the predictions laid out for it.  Headline price growth stalled for the month as a 1.6 percent drop in gas helped pull the energy complex 0.2 percent lower. However, the more absorbing statistics came from the core numbers. Even excluding volatile energy and food, the consumer price index failed to grow through the month. This matches the worst performance from the gauge in 24 years.  At the same time, the annual core read had also decelerated for the second consecutive month. Though it is still running high at 2.6 percent, the dip broadens the Fedââ,¬â"¢s scope for a possible rate cut in the opening months of next year. It didnââ,¬â"¢t take long for the next set of releases to cloud the bearââ,¬â"¢s path however. Leveraging the strong physical balance earlier this week, the TICS report for October printed a better than expected $82.3 billion surplus, while the previous month was revised higher. To confuse the situation even more, the industrial production indicator was of two minds. With a superficial glance, the report seemed promising with 0.2 percent growth in November. Taking a closer look though revealed that, excluding the 3.7 percent rebound in vehicle production, month passed with no change.  Since many of the big US auto-manufacturers are cutting production, this may undercut any suspected strength in the manufacturing sector going forward.

Euro and Swiss Franc
Euro sellers were out and in full force in the New York session with dollar bidding taking the currency pair lower through the 1.3100 handle with relative ease.  Now closing for the third consecutive losing session on dollar fundamentals, bullish players are looking to raise the bid tone, especially market participants who were late on the previous breakout.  However, economic data has to be brighter than todayââ,¬â"¢s consumer price and industrial production data.  In the overnight consumer prices printed a tepid 1.9 percent rise as industrial production actually fell to 3.6 percent on the year on year comparison.  Both pieces of data hardly act as justification for higher interest rates in the region and will likely add to further bearish momentum in the near term.  However, technical support is coming in heavy and may be the defining level in the short term.  Take note, 1.3050. 

British Pound
With no economic data on the day, dollar positive news drove the pair lower in the New York session heading into the weekend.  Falling for the third consecutive session, traders will more than likely turn their attention to next weekââ,¬â"¢s Bank of England minutes report in offering any reprieve from recent pessimism.  Expected is a mix of dovishness in the minutes as policy officials have previously noted the decline in inflationary pressures.  However, an overall hawkish overtone is anticipated in pushing rates higher in the near term as retail sales figures turned positive in the month, lending to potentially surfacing inflation in the coming year.  The notion is likely to be supportive of at least one more rate hike as reflective of current futures contracts, helping the underlying currency to advance at least a little.

Japanese Yen
Widely regarded as the one of the most important reports of the day, the quarterly tankan survey didnââ,¬â"¢t fall short of expectations as results purported an expanding economy.  A survey of current business conditions, the diffusion index rose to a two year high, underlying rising confidence in the near term direction of the worldââ,¬â"¢s second largest economy.  Although some questioned the growth in the region following a 0.8 percent gross domestic product showing, the surveyââ,¬â"¢s results reflect a stronger base as manufacturers and businesses are indicating a more positive near term future.  Subsequently, services activity was also bolstered in the quarter as the Tertiary index produced similar results.  Rising by 2.1 percent, the actual figure beat consensus estimates of 1.2 percent, supportive of growth in the private sector.  Both reports coincidentally countered the leading and coincident indexes with both surveys posting mixed revisions.  Nonetheless, weakness was once again seen in the market for the third straight session as the currency pair tested and eventually broke higher through 118 topside resistance.  Attributed to the appreciation in the pair is the notion that central bankers are still unlikely to move rates higher next week as officials continue to wait for solid support in sales data.  The notion boosted the carry friendly environment taking the dollar bids higher in to the close.

Commodity Currencies (CAD, AUD, NZD)
Commodity bloc weakness was witnessed on the day following the spate of stronger US economic figures in the New York morning.  As a result, losses on the Canadian and Australian dollars were widely seen.  However, countering strength was visible in the New Zealand dollar as manufacturing figures lent bullishness to a currency that has been weakened over the past two sessions.  According to Business New Zealand Ltd., manufacturing in the bloc economy continued to expand as export growth continues to be supportive of further expansion in the region.  With the increase in November, survey results actually round out the best two months of expansion since late 2005.  The report was coupled with the quarterly assessment that rose by 2.7 percent in the third quarter.  As a result, speculation was heightened on the possibility that Reserve Bank Governor Allan Bollard is likely to leave interest rates at the current 7.25 standing as economic expansion is running steady while consumption is being reined in by high interest rates.  Price action is still meeting resistance however, with bids on the currency pair meeting a formidable barrier at the 0.6950 figure, lending to a negative bias next week.

Kathy Lien is the Chief Currency Strategist at FXCM.