Talking Forex: Weekly Wrap

Even though EUR/GBP made solid gains this week, the pair settled the week with a small loss as market participants booked profits following the recent surge. Of note, the EONIA curve steepened aggressively, underpinned by expectations of redemption flows related to LTRO repayments by EU banks as evidenced by higher Euribor rate fixings. Also, press reports that the ECB is said to weigh tougher loan collateral rules, citing sources, added to the steepening bias. In terms of technical levels, supports are seen at the 10-DMA line at 1.3258, 1.3249 and then at the 21-DMA line at 1.3215. On the other hand, resistance levels are seen at the 21-DMA upper Bollinger line at 1.3417, 1.3487 (2012 high) and then at the 50% retracement of the 2011-2012 decline.

GBP/USD
The pair trended lower throughout the week, driven lower by weak macro data and a firmer EUR (higher EUR/GBP cross). The ONS said that retail sales growth for the month of December (annual rate) slowed to lowest since December 1998 - except for December 2010, when sales were hit by heavy snow. The ONS said that clothing and food sales did notably badly, but online retailers did well. In terms of technical levels, supports are seen at 1.5826, 1.5789 and then at 1.5778. On the other hand, resistance levels are seen at the 10-DMA line at 1.6060, 1.6112 which is the 21-DMA line and then at 1.6182.

USD/JPY
The pair settled the week higher, with the one-month implieds bid as market participants remain bullish on near term direction ahead of the BoJ meeting next week. Of note, Japanese economic advisor Hamada said JPY weakness to 95 or 100 vs. USD is nothing to worry about. The weakening bias suffered a temporary pause after comments from Japanese Economy Minister Amari were somewhat misinterpreted (excessive JPY weakness negative for Japan), however he noted the following day that the JPY is still in the process of correcting from excessive strength. In terms of technical levels, supports are seen at 89.00, 88.52 and then at 88.13. On the other hand, resistance levels are seen at 90.21/59 and then at 90.75.

EUR/CHF
EUR/CHF broke above 1.2500 level overnight, however touted profit taking and offers ahead of 1.2575 barriers weighed on the cross this morning. In terms of technical levels, having closed at 1.2474 yesterday (which is the October 2011 high), there is now scope for a test on the next key level at 1.2662 (the 38% retracement of the October 2008 to August 2011 move). Earlier today there was also some market talk that Swiss government wants the SNB to raise EUR/CHF floor to 1.2500.