Last week was definitely a crazy one. While the Greenback received a boost following the revelations of the most recent FOMC meeting minutes, other major currencies experienced huge problems of their own.
The pound, for instance, was initially pressured lower by the very dovish BOE meeting minutes. The minutes showed that policymakers who are in favor of further easing increased by one. Now, the split is 6 (hawks) to 3 (doves), up from 7 to 2. The new addition to the QE camp is none other than BOE Governor Mervyn King.
Bearishness towards the pound didn’t stop there. It was driven even lower towards the end of the week when Moody’s, a credit rating agency, decided to downgrade the U.K.’s AAA debt rating to Aa1.
As for the euro, it was weighed down by a combination of factors. First, there were the weaker-than-expected manufacturing and services PMIs. Second was the uncertainty surrounding the Italian elections. And third was the disappointing LTRO repayment results.
The yen was able to recover slightly last week. I think this was mainly because of traders taking profit on their yen shorts ahead of the nomination of the next BOJ Governor.
Earlier today, however, the yen gave back all of its gains and found itself broadly lower across the board due to rumors that the Prime Minister of Japan would nominate Haruhiko Kuroda as the next BOJ Governor. Kurodo is known as a guy who is in favor of stimulus, which means his appointment could open the way for even more quantitative easing.
Given the fundamental picture, I’ll be keeping a close eye on GBP/USD. I took a look at the pair on the daily timeframe and noticed that it actually just broke a major support level around 1.5370. Zooming in to the hourly timeframe, I noticed that the level actually coincides nicely with the Fibonacci retracement lines as well as the SMAs! I’m looking to sell the pair just below the 1.5500 handle.
USD/JPY: Slightly Bullish
USD/JPY opened up the week with a huge gap up, but the pair seems to be pulling back. I don’t know exactly how low it’ll go but I think the pair could encounter significant resistance at the previous week close. After all, the 200 and 100 SMAs could also be found here. I’m going to watch the area close for a potential buy trade.
There ya have it! That’s basically my game plan for the week. What’s yours?
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