Weekly Wrap: EUR/USD Shows Solid Gains, USD/JPY Finishes Lower

The pair finished the week with solid gains, which were largely driven by the ongoing uncertainty over the ability of the BoJ to deliver price stability in JGB market and also prevent further slide by the Nikkei 225 index which officially moved into bear market territory. There was little in terms of fresh macroeconomic data, but the World Bank cut its Eurozone 2013 growth forecast to -0.6% from -0.1%. Separately, ECB's Asmussen said that the ECB has not seen the need to publish the OMT's legal text. Asmussen added that the ECB could agree on OMT purchases 'very quickly'. In terms of technical levels, supports are seen at the 10DMA line at 1.3233, 1.3177 and then at the key 1.3000 level. On the other hand, resistance levels are seen at the 21DMA upper Bollinger level at 1.3427 and then at 1.3500.

GBP/USD
The pair mimicked the price action by EUR/USD for much of the week and as a result settled with solid gains. Overall, there was little in terms of fresh macroeconomic commentary and instead, the price action was a direct result of USD weakness which in turn stemmed from aggressive liquidations of long USD/JPY positions. Technically, support levels are seen at 1.5521, 1.5488 and then at the 61.8% retracement of the 1.5008 to 1.4685 move at 1.5426. On the other hand, resistance levels are seen at the 61.8% retracement of the 1.6380 to 1.4832 move at 1.5789 and then at 1.5801, which is the 21DMA upper Bollinger level.

USD/JPY
The pair finished the week sharply lower, while the Nikkei 225 index officially moved into bear market territory, after the BoJ kept monetary policy unchanged and retained plan for JPY 60-70trl annual rise in monetary base. The BoJ left funding terms unchanged after JGB yield volatility and refrained from extending the duration of fixed rate fund-supplying operation. The BoJ said it will continue easing until 2% inflation target is reached and will make policy adjustments as needed. The BoJ added that CPI is likely to gradually turn positive and upgraded their assessment of the Japanese economy. Separately, BoJ’s Shirai has said stocks and the JPY are in a correction period adding that the tax hike may hurt household sentiment more than expected and weigh on domestic demand. Technically, major support level is seen at 93.57 which is the 38.2% retracement of the September to May rally.