Global FX: Broad-Based Yen Weakness

The release of somewhat mixed EU-based PMIs failed to weigh on the pair, which finished the session higher after ECB's Draghi said that negative rates were discussed in last policy meeting and no news since then. The head of the bank also said that the ECB did not act because it sees deflation risk materializing in Euro area, still expects inflation to return gradually to levels below but close to 2%. As a result, flows that were evident yesterday amid reports that the ECB could implement negative rates prompted unwind of bull flattening of the Euribor curve and thus pushed money market rates higher. The pair was also supported by broad-based JPY weakness, which in turn resulted in an aggressive surge higher by EUR/JPY. Technically, support levels are seen at 1.3359/45 and then at 1.3318. On the other hand, resistance levels are seen at the 2-DMA at 1.3543, 1.3584 and then at 1.3600.

GBP/USD
The pair finished the session higher after broad based JPY weakness which itself was driven by market reaction to the release of the FOMC minutes and resulted in USD/JPY moving above 101.00 level. Consequent GBP strength saw GBP/CAD test 1.7000 to the upside, while GBP/JPY moved above 163.00 level. There was little in terms of UK related commentary, but BoE's Bean said that the MPC is 'in no rush' to raise UK rates, while the latest deficit data showed that the UK budget deficit narrowed as sales taxes and stamp duty increased. In terms of technical levels, supports are seen at the 30-DMA line at 1.6068 and then at the 10-DMA line at 1.6057. On the other hand, resistance levels are seen at 1.6207/33 and then at 1.6248.

USD/JPY
The pair advanced to its highest level since early July, supported by favourable interest rate differential flows as market participants reacted to the release of the latest FOMC meeting minutes which noted that Fed taper is likely in coming months on better data and that most FOMC members said that IOER cut could be worth considering. The move higher saw the pair erase a good-sized option barrier at 101.00 level, while EUR/JPY finally topped 136.00 level. In terms of Japan-specific commentary, the BoJ voted unanimously to keep monetary policy unchanged, while BoJ's Kuroda said that the BoJ has room to conduct more easing and to adjust policy without hesitation as needed. Technical studies indicate that supports levels are seen at 100.00, 99.93 and then at 99.77. On the other hand, resistance levels are seen at 101.30/38 and then at 101.54.