EUR/USD

The EUR underperformed its peers on Wednesday, with the 1-month r/r at its lowest level since early January and the skew firmed up in the back end as market participants booked profits ahead of the eagerly awaited ECB meeting on Thursday. The press conference is expected to be dominated by questions relating to the recent LTRO repayments, as well as the EUR exchange rate. It is worth remembering that French President Hollande called for government leaders to steer the EUR’s exchange rate and in effect warned that the rising currency may deepen the recession. On that note, German government spokesman said that the EUR is not overvalued at the moment if you look at the long term trend. In terms of technical levels, supports are seen at 1.3415, the 21DMA line at 1.3377 and then at 1.3349. On the other hand, resistance levels are seen at 1.3615 which is 62% retracement of the latest sell-off, followed by 1.3711 and then at 1.3836 which is the 62% retracement of the May 2011 to July 2012 sell-off.

GBP/USD

Shorter-dated EUR/GBP implied vols were better bid on Wednesday and the 1-month implieds were trading at its highest level since mid-June 2012, which comes ahead of the MPC meeting tomorrow and more importantly Carney's appearance in-front of the TSC (Treasury Select Committee). However, the major pair traded steady for much of the session, in close proximity to a large intraday expiry at 1.5630 as safe-haven related flows offset risk off sentiment. In terms of technical levels, supports are seen at 1.5578/67 and then at 1.5550. On the other hand, resistance levels are seen at 1.5800/05/50 and then at the 21DMA line at 1.5872.

USD/JPY

The pair failed to sustain the move higher observed overnight and edged back to unchanged. Nevertheless, implied vols remained better bid, which indicates that the move off overnight highs was largely a product of risk averse flows. Intraday option strikes are seen at 93.25/50 and 94.00, with barriers seen at 94.50 and 95.00. In terms of technical levels, supports are seen at 93.45/00 and then at the Tenkan line at 92.16. On the other hand, resistance levels are seen at 94.13 which is the 38% retracement of the June 2007 to October 2011 bear trade, followed by 97.81 (August 2009 high) and then the 50% level at 99.875.