Talking Forex Daily Wrap: Focus On ECB Policy Meeting

The pair finished the session lower, falling below the 50 DMA line at 1.3186 in the process, with the next key technical support level noted at the 200 DMA line of 1.3144. Going forward, much of the attention will be on the looming ECB policy meeting, where Draghi may seek to downplay the recent rise in money market rates, and therefore is expected to lead to curve flattening. In terms of eurozone related commentary, the OECD said that the ECB must maintain a supportive monetary policy and that the ECB has scope for monetary easing if needed.

Technically, support levels are seen at the 200 DMA line at 1.3144, 1.3115 (Jul 22nd low), and then at 1.3089 (Jul 19th low). On the other hand, the resistance levels are seen at 1.3255 (Aug 30th high), 1.3298 (Aug 22nd low), and then at the 10DMA line at 1.3301.


GBP/USD
The GBP outperformed its peers on Tuesday, with the EUR/GBP falling to its lowest level since mid-May. This followed the release of better than expected UK Construction PMI data, which rose to its highest level since September 2007. The latest leg lower also resulted in shorter dated implieds rising to its highest since mid-July, and 25-delta R/R falling to -0.3500, the lowest since late July 2012. At the same time, the major pair advanced back above the 21DMA line at 1.5547.

In terms of technical levels, supports are seen at the 200DMA line at 1.5502, 1.5462 (Aug 30th low) and then at 1.5450, which is the rising channel base. On the other hand, resistance levels are seen at 1.5638 (Aug 23rd high), 1.5718 (Aug 21st high) and then at the 30-Day upper Bollinger level at 1.5741.


USD/JPY
The pair finished the session with decent gains on the back of interest rate and differential flows. As the USD index continued to grind higher, market participants remained concerned over the geopolitical tensions in Syria, and also fretted over a potential announcement from the Fed regarding QE tapering in the coming weeks.

Technical studies indicate that support levels are seen at the Tensan-Sen line at 97.98, the Kijun-Sen line at 97.88 and then at 97.50. On the other hand, resistance levels are seen at 100.00, the 76.4% Fibonacci retracement of the 101.54 to 95.81 move at 100.19 and then at 100.45 (Jul 24/25th highs).