The development in the forex markets were quite mixed last week despite all the high profile events. While ECB launched unprecedented easing measure, the selloff in Euro was proved to be brief and the common currency indeed gained over the week against dollar and yen. Canadian dollar was the weakest major currency last week as BoC statement played down the significant of the surge in inflation. Yen was the second weakness currency on risk apettie as US indices continued the market to new record higher. On the other hand, Aussie was the strongest currency after RBA maintained the pledge to keep rates unchanged for a period of time. Sterling was the second strongest currency as helped by buying in crosses. Dollar was mixed after some solid economic data, including the ISM indices and non-farm payrolls.
Here are some of the highlights of the central bank events:
Technically, Euro could have formed short term bottoms against dollar and yen. While, Euro extended the down trend against Sterling and Aussie, the move in both crosses looked exhausted. The selling momentum in euro might continue to fade in near term. Yen continued recent consolidative trading. While yen crosses continue to edge higher together with stocks, we'd be cautious on reversal any time as these crosses are generally staying in consolidative range trading. Aussie is staying in range against dollar and would likely extend the sideway trading in near term. While Canadian dollar dipped against dollar, it started to lose downside momentum towards the end of the week. And recent price actions of USD/CAD were also corrective in nature. Thus, we'd also be cautious on reversal any time.
The overall developments in the forex markets left us with no ample opportunity to trade this week. Though, we'd keep an eye on 0.9408 in AUD/USD and 1.6921 in GBP/USD. Break of these resistance levels would imply larger rally resumption and could bring rise back to 0.9460 and 1.6995 high respectively. Otherwise, we'd prefer to stand aside this week.
EUR/JPY's recovery last week indicates that a short term bottom is formed at 137.97 on bullish convergence condition in 4 hours MACD. While upside momentum is a bit unconvincing, further rally is in favor this week. As the cross is staying inside the sideway pattern from 145.68, we'd expect strong resistance from upper trend line (now at 142.10) to limit upside and bring reversal. Meanwhile, below 137.97 will extend the fall from 143.78 and turn bias to the downside for 136.22 support and below.
In the bigger picture, loss of upside momentum was seen in bearish divergence condition in weekly MACD. However, EUR/JPY is so far holding above 135.50 key support. Thus, there is no confirmation of trend reversal yet. Break of 145.68 will extend the up trend from 94.11 towards 76.4% retracement of 169.96 to 94.11 at 152.59 before topping. Meanwhile, break of 135.50 will confirm reversal and target 124.95 support.
In the long term picture, rebound from 94.11 long term bottom is having an impulsive look and thus, indicates that it's far from being finished. 139.21 key resistance is already taken out but there is no clear sign of topping yet. However, upside potential for the moment from long term perspective is limited. We'd anticipate a correction any time, followed by another medium term up trend to retest 169.96 high.