EURUSD: Next major support seen at the 1.3160/40 level

by Talking-Forex.com

EUR/USD

The EUR came under renewed selling pressure on Thursday amid reports that the Irish opposition party will vote against the bailout package. At the same time, the divisions in the Eurozone could not be more evident as some policy makers continued to argue for the need to expand the bailout mechanism and to introduce the Eurobond, while Germany continued to vehemently refuse to accept such proposals. The move lower saw the pair briefly slip below the 1.3200 level, with the next major support seen at the 1.3160/40 level. Thursday also saw Fitch ratings agency downgrade Irish sovereign debt, citing the additional costs of restructuring the country's banking sector and public finances. As such, it is widely seen that other ratings agencies will follow suit. Going forward, Friday sees the release of Italian Industrial Production data alongside French Manufacturing and Industrial Production data. In terms of option expiries, 1.3400 and 1.3325 intraday options are due to expiry at the 10am NY cut (1500GMT).

GBP/USD

The pair finished the session lower amid not only an unexpected widening in the UK trade deficit but also following the release of worse than expected UK Halifax House Price Index data. In terms of the Y/Y figure, the UK Halifax House Price Index fell 0.7%, the first annual decline since November 2009 and reinforced the view that house prices are unlikely to rise in 2011 when the austerity measure begin to kick-in. The move lower saw the pair fall below the key support at 1.5735 which suggests that the Bearish pattern will persist in the coming sessions and the pair will stage a test on 1.5700. In terms of resistance levels, the 21DMA at 1.5816 and then 1.5850 levels are expected to restrain any short-term rallies. Also worth noting that an intraday option at 1.5750 is due to expire on Friday at 10am NY cut (1500GMT).

 USD/JPY

Uncertainty over the whether the Democrats will back the Obama proposed tax cuts extension, together with above consensus Japanese GDP data saw the JPY strengthen against the USD on Thursday. The move lower saw the pair find support just below the 100DMA at 83.76 but above the 10DMA at 83.64. Should the downward price action persist in the coming session, further supports are seen at 83.50 and 82.30. To the upside, resistance levels are seen at 84.20/50 and then at 85.00, which is also the intraday option expiry on Friday at the 10am NY cut (1500GMT). Also worth noting is that that BOJ's policy board member Yoshihisa Morimoto said that expanding the central bank's asset buying fund is a strong policy option if the economy worsens more than expected.