Snowball effects were observed across the FX market in the closing stages of the week, with aggressive USD debasement evident throughout the session on Friday, as market participants reacted to the latest announcement in relation to yet another QE program from the Fed. As a result, EUR/USD continued to squeeze higher, also benefiting from likely reduction in the rate-differentials. The pair also benefited from the fact that the Constitutional Court in Germany allowed the ratification of the ESM, albeit with conditions. In turn, by the closing stages of trade on Friday, the pair was trading firmly above the 200DMA line, with the 3-month implied vols at lowest level since the collapse of Lehman Brothers. In terms of technical levels, supports are seen at 1.2980/46 and then at 1.2900. On the other hand, resistance levels are seen at 1.3181, 1.3242 and then at 1.3284.
The pair trended in tandem with EUR/USD throughout the week, buoyed by the growing sense of relief that the recently announced bond buying program from the ECB and also the Fed will rejuvenate global economy. In terms of UK related commentary, the latest jobs report, which showed that the jobless total fell by 7,000 in the quarter to July to 2.59mln. Also, Britain's trade position improved in July somewhat, with the ONS reporting that the UK's deficit in trade in goods narrowed to GBP 7.1bln in July, down from GBP 10.1bln in June. In particular, exports to non-EU countries increased by GBP 1.3bln to GBP 13.2bln and imports fell to GBP 16.1bln, helping the UK's overall trade deficit ease to GBP 1.5bln from June's GBP 4.3bln. In terms of technical levels, supports are seen at 1.6145, 1.6065 and then at the 10DMA line at 1.6013. On the other hand, resistance levels are seen at 1.6335, 1.6400 and then at 1.6455.
The pair settled the week little changed after speculation that the BoJ was conducting rate checking offset broad based USD weakness which materialised after the Fed announced another bond buying program. In terms of Japan specific commentary, Japan's government have cut their assessment of the domestic economy for the second consecutive month, with the recovery pausing due to the global economic slowdown. Separately, Japanese finance minister Azumi said that recent JPY rise is speculative and that Japan will not tolerate any speculative moves on JPY.