Talking Forex: EUR/USD Settled Higher, GBP/USD Settled Lower

EUR/USD
Even though the release of the most recent FOMC meeting minutes indicated that tapering of the QE may soon ensue, which when combined with a rather hawkish testimony by Bernanke resulted in broad based USD strength, the pair settled the week higher as aggressive long USD/JPY liquidation flows ensured that the USD ended the week lower. The pair also benefited from the release of better than expected German IFO, as well as higher than expected LTRO repayment by banks which prompted aggressive Euribor curve steepening on Friday. In terms of technical levels, support levels are seen at the 10DMA line at 1.2900, 1.2821 and then at 1.2796. On the other hand, resistance levels are seen at the 21DMA line at 1.2999, 1.3030 and then at 1.3051.

GBP/USD
The pair failed to benefit from a weaker USD and settled the week lower, as market participants reacted to the release of softer than expected CPI data, as well as weaker than expected retail sales report. Inflation in the UK slowed in April to a seven-month low and producer prices rose the least since 2009. The Office for National Statistics (ONS) said lower transport costs, notably for motor fuels and air fares, were a big factor in the dip in price pressures. Rises in food and soft drinks prices stopped inflation falling by a bigger margin. The drop in volumes was partly because of cold weather, which the Office for National Statistics said had hit food sales. The BoE MPC voted 6-3 to keep QE unchanged and 9-0 to keep interest rates unchanged at 0.50% (King, Miles and Fisher voted for more QE). Majority said that more QE may lead to questions on CPI tolerance and that prior purchases and the ongoing FLS is still having an impact. In terms of technical levels, support levels are seen at the 21DMA line at 1.5005, 1.4915 and then at 1.4892. On the other hand, resistance levels are seen at the 10DMA line at 1.5185, the 55DMA line at 1.5258 and then at 1.5281.

USD/JPY
The pair settled the week sharply lower, as the release of weaker than expected macroeconomic data from China, as well as hawkish FOMC meeting minutes prompted market participants to reassess whether the aggressive depreciation of the JPY is sustainable. Subsequent liquidation of long USD/JPY and long Nikkei 225 saw the stock index fall over 7% on Thursday alone and the pair to fall back towards the psychologically important 100.00 level.