Busy week ahead for FX markets

The slow start to the morning session in FX belies the importance of datapoints later in the week. 

Source: Bloomberg

Key highlights of the week ahead, at least in economic terms, will be GDP numbers for Q1 from the UK and the US, followed by the latest Federal Reserve statement on Wednesday. There is much less hype surrounding this one, but given the trend of weakening US data we might actually see a more dovish view develop, or at least a view that is more neutral than previous iterations.

The Eurogroup meeting came and went with no major developments, but it looks as if the Greek finance minister, Yanis Varoufakis, has played his hand for now and that the prime minister Tsipras will have to step into the breach. FX markets have started the week relatively calmly, but this is unlikely to last for long.

Sterling pushes GBP/USD higher
Sterling’s bounce has carried it all the way to the 100-day simple moving average (SMA) at $1.5170, and now we see if the momentum can be maintained. The last time we touched this moving average the price rapidly slumped, so be on the lookout for any move back below $1.5155. It would be unwise to argue with the trend just yet, even if the longer-term direction for cable is still down. Thus, any daily close above the 100-day SMA for GBP/USD should be regarded as indicating further upward momentum, even if the daily relative strength index (RSI) and stochastics are both at elevated levels.

EUR/USD to test 50-day SMA
For cable it’s the 100-day SMA, but for EUR/USD the 50-day SMA at $1.0896 is now the one to watch. The currency seems unbothered by the lack of progress regarding Greece, with a target of $1.10 still reasonable if the 50-day SMA is breached. A break through $1.10 would clear the way to $1.15, but that is still a long way off. On the downside, a failure to hold the $1.08 area would signal momentum has shifted once again, putting the focus back on the key $1.05 level of March and April.

USD/JPY in the clutches of key support
This currency pair finds itself once again in the key support region that has prevented further losses since late March. Y118.50/Y119 has been crucial to maintaining USD/JPY near the Y120 level. However the zone from Y120 to Y122 is also major resistance, so until we have a clear breakout progress is likely to be difficult. Any dip below Y119 would target the Y116 area, support in January this year and in December 2015.

AUD/USD continues to move up
Any further move upward here would take AUD/USD to the $0.7890 area that provided resistance in February and March, which takes the price nicely towards the 100-day SMA ($0.7885). A breakout from here would target $0.80, while a failure to remain above the 50-day SMA ($0.7720) targets $0.76.

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