Talking Forex: Weekly Wrap

The single currency fell below the 1.30 this week, for the first time since April after USD’s resurgence led the pair downward. The ECB’s monetary policy still remains cloudy, despite the likes of Weidmann this week clarifying that the ECB can still move further if needed. With the pair breaking through the April 24th low, the 61.8% retracement at 1.2932 of the 1.2740-1.3243 rise marks the next downside threat, although many see the single currency reclaiming 1.30 as EUR/JPY provides cross-support. Next week, the G7 finance ministers and central bankers meeting will likely provide flash risk on any comments toward Japan, but beyond that, French, German and Eurozone GDP lies on Wednesday to provide an update to the growth in the Eurozone after this week’s downgrade to estimates from the ECB’s professional forecasters.

GBP/USD
GBP slid today, falling over 250 pips against the greenback over the past five days, as the USD marched higher throughout the week, driven by stronger data, and investors flying into the USD/JPY pair to take advantage of the Japanese currency’s plummet. Despite the unchanged rate decision from the Bank of England and the continued trend of firmer-than-expected data, cable fell below 1.54, touching lows of 15314 ahead of the London close. Next week brings the Bank of England’s Quarter Inflation Report, where analysts expect the MPC to trim their inflation forecasts due to the slide in energy prices observed over the past three months, but still indicating no monetary easing until well after Mark Carney takes the governor post.

USD/JPY
The pair has been the focus of the day, and indeed the week, after taking the bull by the horns and ripping through 100.00 late Thursday, and subsequently 101.00 in early Tokyo trading hours on Friday. The unprecedented acceleration in the currency pair through the big figures shows how fierce the defence of the 100.00 mark, and how quickly those barriers fell on the way through. The surge in the pair led and dominated all asset classes (not just FX) to see unseasonably volatile trade, halting Japanese bonds after they fell over a point, and allowing the Nikkei 225 to trade at levels not seen since for five years. On Friday, the pair made a run-up to 102.00, with barriers touted at that mark still remaining after a high print of 101.98. The technicals still point upward, with next week likely still focusing on the 102.00 level, as the USD’s strength approaches 2013 highs.