Forex Flash: Overextension and consolidation – BBH (Barcelona) - Brown Brothers Harriman analysts note that following outsized moves in the foreign exchange market yesterday, a consolidative tone has emerged with a few exceptions.

They write, “The big winner yesterday was the euro and with a narrow range of about a third of a cent today, the market seems as if it is catching its breath before assaulting important resistance near $1.33, which capped it in mid-December and at the very start of the New Year. Sterling recovered from a test on $1.60 at mid-week, but lagged behind the euro.”

The pullback today is also more pronounced after the disappointing UK industrial output figures. Industrial production rose 0.3%, half the recovery the consensus expected after the 0.9% decline in October. However, they saw they key disappointment being in manufacturing, which contracted 0.3% compared with consensus expectations for a 0.5% gain, following the 1.4% slide in October. The increases concerns that the UK economy slipped back into contraction following expansion in Q3. Support is now seen near $1.6080.