MARKET UPDATE

EUR/USD

In spite of reports by Bild that the ECB are worried that the EUR strength will hurt recovery in crisis states, the pair settled the session higher, supported by a weaker GBP after BoE’s King hinted that near-term upside inflationary risks may be temporary ignored. Until recently the ECB rarely commented on exchange rates and therefore this comment from the ECB, which hints that Euro is too strong, has caused weakness in the EUR currency. Elsewhere, it was reported citing G7 official, the G7 are less concerned about current level of JPY. Furthermore, officials noted that statement aimed at speed of JPY depreciation and seeks to avoid overshoot and that all G7 members accept no currency war right now and Japan policy to fix domestic economy. In terms of technical levels, supports are seen at 1.3364/25 and then at 1.3300. On the other hand, resistance levels are seen at 1.3577/98 and then at 1.3660.       

GBP/USD

GBP underperformed its peers on Wednesday as market participants digested comments from BoE's King who said the BoE will look through CPI to support recovery. King also added that while the BoE is ready to provide more stimulus, there are limits to what monetary policy can do and that more targeted measures must complement monetary policy. GBP also came under pressure in reaction to comments from the governor who said that investors view GBP depreciation as more likely than appreciation. The Q&A by King following the release of the Quarterly Inflation Report indicated that the central bank is becoming more flexible on inflation targeting and in turn puts emphasis on growth. In turn, this implies that the central bank will not hesitate to ease further, although it remains to be seen whether more Gilt purchases will be carried out or a more creative program will be introduced. In terms of technical levels, supports are seen at 1.5490/58 and then at 1.5414. On the other hand, resistance levels are seen at 1.5700, the 10DMA line at 1.5712 and then at 1.5810.

USD/JPY

The pair settled the session little changed and Japan/US 2y yield spread extended further into negative territory, which points to further JPY weakness. Nevertheless, the price action was somewhat choppy after it was reported citing G7 official, the G7 are less concerned about current level of JPY. Furthermore, officials noted that statement aimed at speed of JPY depreciation and seeks to avoid overshoot and that all G7 members accept no currency war right now and Japan policy to fix domestic economy. In terms of technical levels, supports are seen at 92.36/17 and then at 91.96. On the other hand, resistance levels are seen at 94.46 which is the Feb-11 th high and then at 94.99 which is the May 4 th 2010 high, as well as the August 24 th 2009 high at 95.10.