Forex Weekly Outlook: February 4 - 8, 2013

EUR/USD

Much of the attention this week will be on the upcoming monetary policy meeting, where the head of the central bank is expected to be quizzed on the recent LTRO repayments and also promissory note situation in Ireland. Also of note, there is supply from France, Germany and Spain this week, however market participants will likely concentrate on money market rates instead of bond yield spreads and seek clarity from the ECB on repayments and consequent rise in MM rates. In terms of technical levels, supports are seen at 1.3574/42 and then at the 10DMA line at 1.3450. On the other hand, resistance levels are the 61.8% retracement of the 2011-2012 bear trade at 1.3833 and then at the 61.8% retracement of the 1.4248-1.3484 move at 1.3956.

GBP/USD

Just like the ECB, the MPC are also due to meet this week, however it will likely be the event prior to that that will garner more attention than the rate setting meeting itself. Mark Carney who is due to replace King later on this year is set to testify the very same day, which will be heavily scrutinised for hints with regards to potential changes to the way the BoE conducts its monetary policy. In terms of technical levels, supports are seen at 1.5674, the 21DMA lower Bollinger level at 1.5652 and then at 1.5636. On the other hand, resistance levels are seen at the 200DMA line at 1.5894, the 21DMA line at 1.5936 and then at the psychologically important 1.6000 level.

USD/JPY

The upward bias by the pair is yet to show any signs of moderation which leads to believe that the pair is set to continue to edge higher, at least until market participants get clear signs (inflation expectations data, macroeconomic or even corporate profits) as to whether or not the actions undertaken by the government are working. In terms of technical levels, supports are seen at 90.76, the 10DMA line at 90.45 and then at 90.34. On the other hand, resistance levels are seen at 92.89, 93.65 and then at the 38.2% retracement of the 2007-2011 bear trade at 93.96.