Forex for the week of May 19, 2014
Forex markets over the last week were relatively benign, but did see a bit of volatility on Thursday. However, it should be noted that we are getting close to holiday season for larger European firms, and this will slow the markets down in the near-term. It doesn't mean that there won't be trading to be had in the summer, just that it tends to be a bit slower. Actually – with the way the markets have acted lately – one wonders how much slower? Nonetheless, there are a couple of things worth noting in the Forex markets at the moment.
The EUR/USD pair held the vital 1.37 level on Friday, and this could signal that the selling is almost over. After all, the pair was very impulsive to begin with, only to find a massive amount of support. Are we changing our collective minds now? The area should offer buying pressure, but if it gives way to the sellers,we think the 1.35 level will be about as low as we will go going forward.
Looking forward, there is also a significant amount of support in the USD/JPY pair currently too, and this signals that we could see a nice bounce. The 101 region (really 101.25) has been rock-solid support and there is nothing to make us believe that the market will suddenly change tone. The breaking of the 101 level would be significant, but we don't see this pair falling below the 100 level at that point. The market most certainly is bullish on the pair overall from everything we see and hear, but ultimately it needs a catalyst to break out and up to the 103 level. It is all about waiting for that at this point.
All things being equal, we expect a slight “risk on” kind of a week. Nothing major, but positive for risk nonetheless.
Mon. – AUD, Monetary Policy Meeting Minutes
Tues. – GBP CPI y/y, JPY Monetary Policy Statement,
Weds. – CHINA HSBC Flash Manufacturing PMI.
Thurs – CAD Core Retail Sales, US Unemployment Claims
Fri – CAD Core CPI