Global FX: Tight Trade On Fed Watch

The pair settled the session little changed as market participants remained on the sidelines ahead of the key FOMC meeting which will be heavily scrutinised for comments regarding tapering of asset purchases. In terms of EU related commentary, a Eeuro-zone official said that the euro zone will not revise terms of the Cypriot bailout conditions following reports that Cyprus’ president has asked euro-zone leaders for a complete revamp of his country’s EUR 10bln bailout. Also of note, talk of a bearish New York think tank report on the ECB circulated in the second half of the session. The report says the ECB governing council is still as dovish as it was at the May meeting however disagree over how to structure a further rate cut if downside risks materialize. In terms of technical levels, supports are seen at the 10-DMA line at 1.3326, 1.3319 and then at 1.3300. On the other hand, resistance levels are seen at 1.3416 and then at the 76.4% retracement of the 1.3711 to 1.2740 move at 1.3481.

GBP/USD
Similarly to EUR/USD, the pair traded within a relatively tight range as market participants refrained from making directional bets ahead of the key FOMC meeting. In terms of UK related commentary, the release of the most recent MPC minutes showed that the MPC voted 6-3 to keep QE unchanged, as expected, with the majority stating that the QE and FLS are still working through economy. In terms of technical levels, support levels are seen at 1.5521, 1.5488 and then at the 61.8% retracement of the 1.5008 to 1.4685 move at 1.5426. On the other hand, resistance levels are seen at the 200-DMA line at 1.5696 and then at the 61.8% retracement of the 1.6380 to 1.4832 move at 1.5789.

USD/JPY
The pair settled in minor negative territory, as profit taking related flows following the surge on Tuesday, as well as the risk off sentiment ahead of the FOMC, weighed on the pair. In terms of Japan specific commentary, BoJ governor Kuroda said the BoJ's April 4 action does not mean it will not act for two years and that yields may rise if BoJ bond buys is seen as government financing. S&P chief global economist Sheard said the BoJ can buy more risk assets and the BoJ may be holding back on ammunition. Technically, support levels are seen at 94.08, 93.98 and then at 93.50. On the other hand, resistance levels are seen at 95.66/77 and then at 96.09.