Stronger growth in Japan is ignored as market takes a breather ahead of Spanish GDP and auction

EUR/USD
Range: 1.3138-1.3162
Support: 1.3080
Resistance: 1.3350

The euro trades in a narrow range as the market takes a breather following the sharp sell of this week ahead of the GDP print from Spain and Spain’s auction of euro 1.5 billion-2.5 billion across the three and four year sectors. The market will keep their eyes peeled for European headlines hitting the wires for knee jerk trading similar to what we saw yesterday afternoon when the ECB announced it had stopped lending operations to some Greek Banks. I expect negative headlines will continue until the Greek election as the rest of Europe reminds them what is at stake with the market remaining firmly in a sell rallies mode.

GBP/USD
Range: 1.6173 – 1.6195
Support: 1.6150
Resistance: 1.6350

Cable trades with a slightly weaker tone following the BoE’s inflation report yesterday with cable opening close to 1.5900 and EUR/GBP back above 0.8000 (GBP/EUR 1.25). BoE Governor Mervin King said officials have prepared for dangers posed by Europe’s debt crisis, after BoE lowered growth forecasts yesterday and raised predictions for inflation this year. He said “Contingency plans have been discussed and have been for a considerable time.” He adds “We are navigating through turbulent waters with the risk of a storm heading our way from the continent.” There is no UK data today.
USD/JPY
Range: 1.0255-1.0287
Support: 1.0240
Resistance: 1.0450

Japan’s preliminary first quarter GDP beat the consensus of 3.5% coming in at 4.1% but the market reaction was surprisingly muted as the market focused on the statement that GDP could fade amid slowing demand from Europe. The Tokyo market was also spooked from buying the JPY with further rumours of monetary easing by the BOJ. The main focus from the US today will be the release of the Philadelphia Fed index which is expected to show a slightly stronger reading this month of 10.5.