Heavy Yen Trading As Goldman Sachs Weighs In

The pair settled lower, as market participants continued to book profits in reaction to the recent sharp rally. Despite the bullish sentiment, the fundamental outlook for the euro zone remains rather bleak as confirmed by today’s sources comments from the German ministry who noted that the German government sees 0.4% GDP in 2013 and 1.6% in 2014. In other EU-related commentary, Fitch sees AAA sovereigns underpressure in 2013 and beyond, citing risks of China "hard landing" and US fiscal policy. Fitch also noted that Spain is unlikely to request ESM aid program in 2013 and that Spain rating at risk of downgrade even if it manages to avoid going into rescue programme. In terms of technical levels, supports are seen at the 21-DMA line at 1.3200 and then at the 10-DMA line at 1.3190, followed by 1.3039. On the other hand, resistance levels are seen at 1.3404/87 and then at 1.3491, which is the 50% of 2011-2012 decline.

GBP/USD
EUR/USD and GBP/USD came under persistent selling pressure today, driven lower by a firmer USD, as well as the ongoing trend higher in EUR/CHF. Also, touted profit taking following the recent surge by EUR/USD contributed to flows away from what is generally perceived as riskier assets. Of note, the Office for National Statistics said that the UK consumer prices inflation held steady at 2.7% in December. A rise in electricity and gas prices was offset by a fall in fuel costs and air transport. In terms of technical levels, supports are seen at 1.6005, 1.5992 and then at 1.5962. On the other hand, resistance levels are seen at the 21-DMA line at 1.6150, 1.6182 and then at 1.6200.

USD/JPY
The pair traded heavy today, in reaction to overnight comments from Japanese Economic Minister Amari who said that an excessively weak JPY has negative effects on livelihoods and is not good for the economy. Of note, Goldman Sachs Asset Management Chairman Jim O’Neill said the BoJ must show it is serious about inflation targeting for the JPY to weaken further. In terms of technical levels, supports are seen at 88.02, 87.87 and then at 87.40. On the other hand, resistance levels are seen at 89.00/67 and then at 89.98 (June 24, 2010 high)