EUR/USD Supported By Japan's Announcement To Buy ESM Bonds

Even though the pair was supported overnight by the comments from Japanese finance minister Aso who said that Japan are to buy ESM bonds using foreign exchange reserves, the pair settled the session lower as market participants remained wary of looming EU debt issuance. On that note, Spain announced that total borrowing this year will reach EUR 215-230bln, up 7.5% compared to the forecast made in September. In terms of technical levels, supports are seen at 1.2992 which is the 55DMA and then at the 21DMA lower Bollinger level at 1.2979. On the other hand, resistance levels are seen at the 21DMA line 1.3158 and then at the 10DMA line at 1.3162.

GBP/USD
The pair traded in tandem with EUR/USD for much of the session and as a result settled lower as market participants remained sceptical over growth prospects for the eurozone and speculated of a potential rate cut by the ECB. The MPC meeting this Thursday is unlikely to result in an announcement of any new policy easing measures.

In terms of UK related commentary, UK inflation expectations for year ahead fell to 2.7% in December from 2.8% in November according to YouGov/Citi. Inflation expectations for the next 5-10 years dropped to 3.3% in December from 3.4% in November. In terms of technical levels, supports are seen at 1.6022/10 and then at 1.6002. On the other hand, resistance levels are seen at the 21DMA line at 1.6165 and then at 1.6289 which is the 21DMA upper Bollinger level.

USD/JPY
Japanese PM Abe said he will compile government's economic stimulus measures on January 11th. In relation to this, a Japanese economic stimulus package draft released overnight said the government is to closely monitor Forex moves and take appropriate actions when needed. Nevertheless, the pair failed to benefit from the so-called Abe trade and remained under pressure as market participants booked profits following the recent bout of depreciation. In terms of technical levels, supports are seen at the 200HMA at 87.03, 86.95 which is the Tenkan-Sen line and then at 86.78 (Jan 3rd low). On the other hand, resistance levels are seen at 87.59/82 and then at 88.00 level.