Quiet European FX Trading On Consolidation

The pair settled the session little changed, as market participants used what was generally a quiet trading session in Europe as an opportunity to consolidate in the mid-1.3300 region. Nevertheless, the trend remains bullish and is widely expected to continue to benefit from re-pricing of interest rate expectations after Draghi indicated that conditions in Eurozone are improving during the most recent press conference which took place last week. In terms of technical levels, supports are seen at 1.3192, which is the 21-DMA line and then at the 10-DMA line at 1.3175. On the other hand, resistance levels are seen at the 50% retracement of the 2011-2012 decline at 1.3491 and then at 1.3550.

GBP/USD
Corporate demand for EUR/GBP which traded at its highest level in nine months, together with touted offers by model accounts of GBP/USD, saw the trade weighted GBP index fall to a seven-month low. As a result, the pair settled lower and there is a risk of further downside given the renewed sense of confidence in Europe following last week’s press conference by the ECB. In terms of technical levels, supports are seen at 1.5992, 1.5962 and then at 1.5900. On the other hand, resistance levels are seen at 1.6156/82 and then at 1.6255.

USD/JPY
The pair settled the session lower as market participants booked profits amid light trade volumes linked to the Coming of Age holiday in Japan. Nevertheless, Japanese PM Abe said that the Bank of Japan needs to state a clear 2% inflation target in a joint statement later this month, in a way that sets the direction for implementing monetary policy and beating deflation plaguing the nation's economy. In terms of technical levels, supports are seen at 88.68, 48 and then at 88.10. On the other hand, resistance levels are seen at 89.67/98 and then at 90.59.

EUR/CHF
The pair printed a fresh 13-month high on Monday after tripping stops through 1.2237 which was the mid-point of the October 2011 to April 2012 sell-off. Options market was very active, with the one-month implied trading at its highest level since September 2012. M&A-related flows stemming from Swatch Group’s purchase of Harry Winston said to have added to the volatility.