Unless you’ve been living under a rock, you’ll know that the financial trouble in Cyprus has been the primary focus of the forex market for the past few days. Market sentiment was initially negative because of the Troika’s proposal to tax depositors’ money. Thankfully, the Cypriot parliament rejected it, and a new plan was created.
Under the new plan, Cyprus’ second largest bank, Laiki, would be shut down and divided. Deposits under 100,000 EUR would be moved to the Bank of Cyprus. Meanwhile, those more than 100,000 EUR, would be frozen and used to pay for debts. No more than 40% in losses will be imposed on these deposits though.
Surely, the country’s future is still unclear, but developments last Friday have made things slightly better.
I also don’t expect Cyprus to leave the monetary union like some “gloom-and-doom” economists have been forecasting. A Cyprus exit will do more harm than good, as it will probably escalate the financial problems of the euro zone.
In any case, it’s a brand new week, and I think the “positive” developments will be supportive of risk sentiment. That being said, below are two pairs that I’m watching carefully.
Technically speaking, GBP/USD has been in a short-term uptrend. Price is currently trading above both the 100 and 200 SMAs, and it has been forming “higher lows.” In addition, a rising trend line is starting to form, which could serve as support in the event that it is tested on a pullback.
Since my trade on USD/CHF (which I will update tomorrow!) worked out so well, I’m thinking of playing the pair again! On the hourly timeframe, we see that the pair finally broke below support around .9425. However, we could soon see a pullback and a retest of the support area. If reversal candlesticks materialize around the 50% Fibonacci retracement level, I might jump in and short the pair.