Global FX: EUR, GBP Up

The pair finished the week higher, but the price action was largely a result of the unexpected move by the Fed to refrain from tapering QE and not a fundamental shift in the sentiment towards the currency. Following the move to keep the pace of QE ops unchanged, analysts at Goldman Sachs noted that they now expect the Fed to start taper in December and finish in Sept 2014, and also maintained first rate hike call for early 2016. In terms of EU related commentary, S&P forecasts a 0.7% decline in real GDP in euro zone this year and sees 0.8% rise in euro zone real GDP in 2014 and 1.3% in 2015. Elsewhere, the minutes of the ECB's money-market contact group revealed that Draghi told the group the ECB intends to move to simpler collateral framework when fragmentation is significantly reduced. Technically, support levels are seen at 1.3501 (Sep-19 low), 1.3453 (Aug-20 high) and then at 1.3399 (Aug-28 high). On the other hand, resistance levels are seen at 1.3598 (Feb-5 high), 1.3660 (Feb-4 high) and then at 1.3711 (Feb-1, 2013 high).

GBP/USD
The pair finished the week higher, buoyed by less dovish than expected MPC meeting minutes and also by the Fed’s decision not to taper QE. The minutes of the most recent MPC meeting revealed that no MPC member saw more stimulus needed at present and voted unanimously to keep the benchmark rate, as well as the APF unchanged. The minutes also noted that the expectations of future inflation implied by financial market prices had risen only marginally on the month. However the MPC also noted that GBP strength makes CPI slightly more likely to be below 2.5% in 18-24 months, oil may push up short-run CPI. In terms of UK macroeconomic data, the latest retail sales data from the UK failed to meet analyst expectations, with the ONS stating that the drop was due to sharp fall in food sales. Technical studies indicate that support levels are seen at 1.6000, 1.5893 (Sep-18 low) and then at 1.5886 (Sep-17 low). On the other hand, resistance levels are seen at 1.6164 (Sep-18 high), 1.6182 (Jan-11 high) and then at 1.6255 (Jan-3 high).

USD/JPY
The pair finished the week little changed, after the decision by the Fed not to taper was offset by the ongoing expectation that the BoJ and the government will work together to ensure that the looming tax rate hike does not stifle economic recovery. Of note, BoJ board member Kiuchi said the BoJ's two-year time frame is too short in meeting its 2% inflation target. Also, Japanese PM Abe instructed his finance ministry to include a two-stage lowering of corporate taxes in economic stimulus measures that would kick in if the consumption tax is hiked in April as expected. In terms of technical levels, supports are seen at 98.72 (Kijun-Sen line), 97.88 (Sep-19 low) and then at 97.83 (Ichimoku Cloud top). On the other hand, resistance levels are seen at 99.98 (Sep-13 high), the key psychologically important 100.00 level and then at 100.24/25.