Weekly Trading Forecast: FX Market Looks to Turn Volatility into Trend Reversals
Having started out the period with a painful collapse, the US dollar ended this past week with a strong rally that brought it back to even.
A serious flaw was exposed in the European Central Bank’s policy strategy this week: with ECB President Mario Draghi saying that the Governing Council felt “comfortable” enacting further dovish policies at the June meeting, there is now a full-blown expectation of a substantive policy change in four weeks. The Euro is already struggling as a result, now that the ECB is backed into a corner.
The Japanese Yen trades at critical resistance versus the US Dollar (USDJPY trades at support). Given extremely low volatility expectations it seems unlikely we see a major USDJPY breakdown, but any major surprises out of upcoming Japanese data could force sharp currency swings.
Gold prices are softer for the second consecutive week with the precious metal off by nearly 1% to trade at $1287 ahead of the New York close on Friday.
The Australian Dollar snapped three consecutive weeks of losses but road ahead may prove to be a perilous one as chipper US economic data boosts Fed “taper” continuity bets.
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