EUR/USD Trends Lower As Markets Position Ahead Of ECB Meeting

The pair trended lower throughout the session as market participants pre-positioned ahead of the latest ECB governing council meeting on Thursday. Rates are expected to remain unchanged and despite the spurious speculation of negative deposit rates, EONIA FWD rates have completely reversed the move lower from December meeting where policy makers were said to have discussed such a move. In terms of technical levels, supports are seen at 1.3018, 1.2998 and then at 1.2996. On the other hand, resistance levels are seen at the 10DMA line at 1.3141 and then at the 21DMA line at 1.3159.

GBP/USD
The pair settled lower and mirrored the price action by EUR/USD for much of the session as market participants pre-positioned ahead of Thursday’s ECB and BoE monetary policy meetings. Of note, according to members of the Times Shadow Monetary Policy Committee, the BoE should follow the US Fed by giving explicit guidance on interest rates.

Sushil Wadhwani, the chief executive of Wadhwani Asset Management, and Michael Saunders, UK economist for Citigroup, believe that it is time for the MPC to consider the move to make it clear that rates, which stand at 0.5 per cent, will remain ultra-low for an extended period. In terms of technical levels, supports are seen at 1.5962/20 and then at 1.5828. On the other hand, resistance levels are seen at the 10DMA line at 1.6137 and then at the 21DMA line at 1.6158.

USD/JPY
USD/JPY trended higher this morning, after sources indicated that the BoJ may ease in January and that Abe is continuing to press for 2% inflation target. Of note, this morning's weakness is also being attributed to talk of a large USD/JPY option flow. A 31 January expiry 91.00 JPY put has just been sold on USD 1.1bln at 11.15. Sources suggest the same US name also bought 1 month ATM vol at 9.8 on Monday for USD 1bln. In terms of technical levels, supports are seen at 86.83/77 and then at 86.52. On the other hand, resistance levels are seen at 87.82, 88.00 and then at 88.38.