Global FX: USD Starts To Firm

The pair finished the week little changed after the release of encouraging set of PMIs was offset by a firmer USD after the release of the FOMC meeting minutes underpinned market expectations that the Fed may announce plans to taper QE in September. Even the hawkish comments from ECB’s Weidmann who said that forward guidance will not change ECB course of action, while ECB's Nowotny noted that good economic news removes the need for a rate cut failed to support investor demand for the currency. In terms of other EU related commentary, GR and IT paper came under pressure mid-week, after Sueddeutsche Zeitung reported that Greece's third aid programme will likely be financed at least in part by the EU budget, while Italy's Berlusconi said to have given Italian PM Letta and his allies ten days to find a solution that will allow him to remain in politics or withdraw from the coalition if Senate votes Berlusconi out of Parliament. Looking at the price action technically, supports are seen at the 10-DMA line at 1.3330, the 30-DMA line at 1.3267 and then at 1.3222, which is the weekly cloud top. On the other hand, resistance levels are seen at 1.3373 (Aug-22 high), the 30-Day Upper Bollinger line at 1.3433 and then at 1.3453 (Aug-20 high).

GBP/USD
Similarly to EUR/USD, the pair also finished the week little changed, after the release of the FOMC meeting minutes which was consistent with market expectations of QE tapering in September saw the USD index move above the 200-DMA line. At the same time, despite the fact that UK macroeconomic data continued to surprise to the upside, as evidenced by the release of the better than expected Q2 GDP report, market participants are growing increasingly wary of potential actions by the BoE to realign market expectations of future interest rate hikes with those as viewed by the BoE. On that note, BoE's Weale said he can envisage circumstances when further QE may be needed and as far as he is concerned, asset purchases remain a tool available to the committee if it feels the economy needs further support. At the same time, Chief Global Economist at S&P said that BoE’s introduction of forward guidance when inflation has been consistently higher than target may cause concerns that it is going soft on inflation. In terms of technical levels, supports are seen at 1.5563 (Aug-22 low), the 200-DMA line at 1.5518 and then at 1.5504 (Aug-15 low). On the other hand, resistance levels are seen at 1.5718 (Aug-21 high), the 30-Day Upper Bollinger level at 1.5726 and then at 1.5753 (Jun-17 high).

USD/JPY
The pair finished the week with solid gains on the back of interest rate differential flows after the release of the minutes from the most recent FOMC meeting did little to discourage market participants from betting on the Fed announcing plans to taper QE in September. Going forward, talks on sales tax hike will garner even more attention than ever before, with Japan LDP tax panel's Noda noting this week that sales tax rise is inevitable. Technically, supports are seen at the Kijun-Sen line at 98.43, 98.09 and then at 98.01, which is also the Tenkan-Sen line. On the other hand, resistance levels are seen at 99.15, the 61.8% Fibonacci retracement of the 101.54 to 95.81 move at 99.35 and then at the psychologically important 100.00 level.