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Talk Of Intervention Drives FX

Published 08/17/2012, 11:30 AM
EUR/USD
The pair settled the week higher as market participants continued to speculate on an imminent bailout of Spain. According to analysts and strategists at an influential think tank, there will be a major intervention in the Spanish bond market once the official request is made. Apart from supporting the pair, this also resulted in a significant reduction in shorter-dated bond yields in Spain. There were also reports that Spain is to accelerate the bank bailout and is about to receive an emergency disbursement from the EUR 100bln bailout failed to support domestic bond market. In other news, it was reported that Greece is seeking a two-year extension of its latest austerity programme aimed at improving the country’s debt sustainability and prospects for a return to growth. This would slow the pace of the EUR 11.5bln in spending cuts from the present schedule of 2013-14 to a four year spread of 2016. In terms of technical levels, supports are seen at 1.2294/56 and then at 1.2195. On the other hand, resistance levels are seen at 1.2388, 1.2402 and then at 1.2429.

GBP/USD
The pair settled the week with modest gains following the release of better-than-expected UK retail sales and an encouraging jobs report. UK retail sales for July showed a beat expectations for both the yearly and monthly figures, with upward revisions for June's reading as well. Retail sales were expected to decline for the month due to bad weather deterring shoppers, and also as people avoided London city centre during the Olympics, but the Office of National Statistics said that the Olympics did not affect retail sales. Separately, the release of the most recent policy meeting minutes from the BoE revealed that all nine MPC members voted unanimously to keep the benchmark interest rate unchanged at 0.50% and the APF unchanged at GBP 375bln. Some MPC saw good case for further expansion of QE and noted that Inflation is still susceptible to external price shocks, but is likely to move closer to the 2.0% target in the coming months. In terms of technical levels, supports are seen at the 10-DMA line at 15671 and then at 1.5636. On the other hand, resistance levels are seen at 1.5745/50 and then at 1.5768.
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USD/JPY
The pair benefited from bids from domestic accounts as market participants returned from Obon holidays. Also, ongoing speculation of policy easing by the ECB and the Fed, which may also result in a fresh announcement relating to bond purchases by the BoJ, supported riskier assets. The move higher saw the pair breach the 200-DMA at 79.21, with technical resistance levels noted at the 100-DMA at 79.66 and then at 80.00. On the other hand, supports are seen at 79.14, 78.92 and then at 78.84.

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