Global FX: EUR/USD Treads Water

The pair finished the session little changed, after the release of better-than-expected GDP reports from Germany and France were offset by a lower EUR/GBP cross, which was driven by the release of somewhat hawkish BoE meeting minutes. The ECB will be keenly aware of the fact that market rates have surged to somewhat uncomfortable levels in spite of the fact that the ECB only recently announced that it is to manage interest rate expectations via forward guidance, as such there is a risk that policy makers will seek to downplay market expectations which in turn may weigh on EUR/USD. In terms of technical levels, supports are seen at 1.3233 (Aug 5th low), 1.3188 (Aug-2 low) and then at 1.3166 (Jul-25 low). On the other hand, resistance levels are seen at the 10-DMA line at 1.3295, 1.3317 (Aug-13 high) and then at 1.3345 (Aug-12 high).

GBP/USD
The pair finished the session higher on the back of somewhat divided MPC meeting minutes, which revealed that Martin Weale dissented on forward guidance vote and wanted a shorter time horizon for 2.5% CPI knock-out clause than 18-24 months. Votes to keep the Asset Purchase Facility (APF) and the benchmark borrowing rate at record low were unanimous, as expected. The minutes also showed that most members thought that UK short-term market interest rates are out of line with economic outlook and some members still believe case for more QE is compelling, but want to gauge impact of guidance before raising asset purchases. Technically, support levels are seen at the 10-DMA line at 1.5403, 1.5375 (Aug-9 low) and then at the 100-DMA line at 1.5321. On the other hand, resistance levels are seen at 1.5513 (Aug-13 high), the 200-DMA line at 1.5526 and then at 1.5558 (Aug-9 high).

USD/JPY
Having surged higher over the past several sessions, the pair traded steady, today, albeit in minor positive territory, as market participants contemplated as to whether or not the price action going forward will depend more on the never-ending QE taper talk or rely more on uncertainty surrounding Japan’s ability to manage its finances. The price pattern remains in a bearish channel, with a risk of a reversal emerging should the 50-DMA line be breached at 98.33 and then at the 100-DMA line at 98.75. In terms of technical levels, supports are seen at 96.88 (Aug-13 low), 95.92 (Aug-12 low) and then at 95.81 (Aug-8 low). On the other hand, resistance levels are seen at the Kijun-Sen line at 98.52, 98.75, which is the Ichimoku Cloud Base and then at 98.80, which is the Cloud Top level.