Global FX: Weekly Wrap

The pair finished the week little changed, as uncertainty over the next move by the ECB following another round of less than impressive macroeconomic data, as well as fresh bout of volatility in the Japanese bond market spilled over into other asset classes. In terms of this week’s macroeconomic data releases, Italian unemployment rate rose to 36-year high to 12.0%, while the Eurozone wide unemployment rate also edged higher to 12.2% from 12.1%. On the subject of the ECB, analysts at Goldman Sachs expect the ECB to keep rates unchanged at next meeting and also refrain from announcing any new policy easing measure. Also of note, ECB’s Visco who said that the ECB is ready to intervene again on rates and consider all measures to maintain credit conditions consistent with monetary policy stance weighed on sentiment. Technically, support levels are seen at the 55-DMA line at 1.2979, which once broken exposes the 21-DMA line at 1.2964. Resistance levels are seen at the 61.8% retracement of the 1.3243 to 1.2796 move at 1.3072 and then at the 100-DMA line at 1.3114.

GBP/USD
The pair finished the week little changed and largely mimicked the price action by EUR/USD which also settled near the unchanged level, as market participants speculated as to whether or not the ECB will announce any new policy easing measures and also fretted over the volatility in the Japanese bond market. Of note, former BoE MPC member Posen, who said that the BoE is unlikely to talk down the GBP anytime soon, adding that Carney will not have tools to weaken the GBP. Nevertheless, the pair is seen trading in minor negative territory. Technically, support levels are seen at the 10-DMA line at 1.5140 and then at 1.5111, followed by the 21-DMA lower Bollinger® level at 1.4938.

USD/JPY
The pair settled the week lower, as concerns over the stability in the Japanese bond market led to a bout of long USD/JPY liquidation trades and consequently weighed on the benchmark stock index. At the same time, the pair briefly benefited from reports that Japan Public Pension Fund (GPIF) is considering a change to its portfolio strategy that could allow domestic equity share of investment to rise in rallying market, citing sources. In other news, IMF said Japan's 2013 growth projected at + 1.6% and 2014 growth projected at + 1.4%. The IMF added JGB markets face uncertainty as it weighs effects of QE with higher inflation in future and that the BoJ should begin planning early to address risks from exit from QE given the large increase in balance sheet. While Japan is to impose new rules on FX margin trading, according to unsourced reports. The changes are in order to protect investors and limit scope for speculation, with the FSA to restrict trading in binary options, banning trades less than two hours ahead as early as this year.