GBP/USD: In spite of a firmer USD

EUR/USD

The pair finished the session sharply lower after the release of much softer than expected Eurozone CPI estimate prompted market participants to speculate of a potential rate cut by the ECB next week. The move lower was also assisted by comments made by ECB’s Nowotny, who said that there will be further liquidity provision, adding that he wants to avoid sudden effects and must avoid falling off cliff as LTRO comes to an end. The Greenback, which gained almost 0.5%, was supported by less dovish than expected FOMC statement yesterday, which excluded language around tightening financial conditions. In terms of technical levels, supports are seen at 1.3541/16 and then at 1.3500. On the other hand, resistance levels are seen at 1.3787, 1.3818 and then at 1.3833. It is also worth noting the ECB has said it's standing swap lines agreements with the BoE, Federal Reserve, BoJ, SNB and BoC are to become permanent facilities and that it may adjust the frequency and maturity on changing market conditions.

GBP/USD

In spite of a firmer USD, the pair finished the session little changed after a sharp decline by EUR/GBP, which itself was driven by broad based EUR weakness following the release of softer than expected Eurozone CPI estimate. There was little in terms of UK related commentary and the pair spent much of the session being driven by the EUR related flow. Technically, support levels are seen at the 76.4% Fibonacci retracement of the 1.5894 to 1.6258 move at 1.5980 and then at 1.5940. On the other hand, resistance levels are seen at the 30DMA line at 1.6085 and then at the 10DMA line at 1.6132.

USD/JPY

The pair failed to benefit from a firmer USD and settled the session lower after the release of softer than expected Eurozone CPI estimate resulted in an aggressive move lower by EUR/JPY. In turn, this offset any favourable interest rate differential flows following less dovish than expected FOMC statement and also consensus beating Chicago PMI. Of note, the Bank of Japan kept monetary policy on hold, alongside expectations, in a unanimous vote. BoJ 2014 Monetary Base Target (JPY)(Oct 31) 270trl vs. Exp. 270trl (Prev. 270trl). Also, the latest Japanese Manufacturing PMI came in at its highest level in over 3 years. Technical studies indicate that support levels are located at the Tenkan- Sen line at 97.82 and then at the 200DMA line at 97.53. On the other hand, resistance levels are seen at the Ichimoku Cloud top at 98.72 and then at 99.01.