FX Overseas: USD Weakens

In spite of the evident risk-off sentiment, the USD was seen weaker across the board as concerns over the ongoing volatility in the Japanese bond market, as well as uncertainty over the growth prospects in Japan resulted in another round of long USD/JPY position liquidations. In turn, risk averse flows benefited CHF in the FX market, while EUR/USD advanced on the back of a weaker USD. Of note, the OECD cut its 2013 World GDP growth forecast to 3.1% from 3.4% and said that the ECB can take more unconventional steps to help economy. In terms of EU related commentary, analysts at Nomura today suggesting that the ECB rate decision may disappoint markets, given that Euro-area data does not appear to have weakened sufficiently to warrant immediate action. In addition to that, analysts see only 20% chance of a negative deposit rate being introduced in the next three meetings, with the central bank likely to view it as an emergency step. Separately, German daily Die Welt reports that ECB's Mersch is resisting the ECB's use of additional non-standard measures to ease burden for the struggling peripheral euro zone. In terms of technical levels, supports are seen at 1.2821/09 and then at the 21-DMA lower Bollinger® level at 1.2761. On the other hand, resistance levels are seen at the 21-DMA line at 1.2974, 1.2998 and then at 1.3030.

GBP/USD
Similarly to EUR/USD, weaker USD ensured that the settled the session higher, in spite of the cautious sentiment, which saw equity indices on both sides of the pond come under selling pressure. There was little in terms of fresh macroeconomic news flow and the price action was largely driven by USD/JPY liquidation flows. In terms of technical levels, supports are seen at the 21-DMA lower Bollinger® level at 1.4918, 1.4900 and then at 1.4892. On the other hand, resistance levels are seen at the 10-DMA line at 1.5136 and then at 1.5175.

USD/JPY
The pair settled lower, after yet another volatile session in Japanese bond market, as well as the release of yet another cautious report from the IMF on China’s growth prospects resulted in long USD/JPY liquidation flows. In terms of Japan specific macroeconomic commentary, BoJ senior official said that many market participants asked BoJ to buy JGBs more often in smaller amounts. In addition to that, BoJ senior official said that some market participants said BoJ should consider offering funds in market operations beyond one year. In terms of technical levels, supports are seen at the 21-DMA line at 101.02, 100.00 and then at 100.66. On the other hand, resistance levels are seen at 102.59, 103.57 and 103.74.