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Fundamental Picture

Talk about exhilarating! World War Z had nothing on the action that we saw on the charts last week. The shortened trading week due to the U.S. Independence Day holiday and the handful of economic catalysts on tap was the perfect combination for increased volatility!

Initially, there were the Bank of England (BOE) and European Central Bank (ECB) rate decisions. Newly-appointed BOE Governor Mark Carney sparked a huge pound sell-off when he hinted at further easing from the BOE. According to him, the recent uptick in short-term interest rates doesn’t reflect strength in the economy. With those words, market participants speculated that the BOE could soon ease monetary policy even further.

Then there was the ECB rate statement. Although many already anticipated the ECB to sound dovish, it didn’t keep the euro from dropping like a rock after ECB President Draghi said that they would keep rates low for an extended period of time and that they are open to negative rates.

Finally, the much-anticipated NFP report for June was released on Friday. While the unemployment rate remained steady at 7.6% (it was seen at 7.5%), the headline jobs figure topped expectations at 195,000. To make it even better, the reading for May was upwardly revised to 195,000 from 175,000.

This coming week, we don’t have as much catalysts on tap as we did last week. However, we do have Fed Chairman Ben Bernanke’s speech scheduled. If he reflects a bit of optimism following the better-than-expected jobs report, we could see the dollar extend its rally!

Potential Trades

USD/JPY: Bullish

USD/JPY 1-hour Chart

I’m planning to buy USD/JPY in the coming days. From the looks of it, it seems that the 100 SMA has supported the pair well in the past. If reversal signals materialize when price tests the indicator, I will probably pull the trigger on a long.

EUR/USD: Bearish

EUR/USD 1-hour Chart

I’m bearish on EUR/USD, though it’s hard to pinpoint an accurate entry. While the trend is downwards as indicated by the lower highs and lower lows, the pair is severely extended from other SMAs. The Stochastic also indicates that its oversold, which means that a pullback might be in the cards. I’ll wait for a proper setup before shorting this pair!



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This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.