Strong market flow is not expected | 21 March 2014

Euro

Perhaps, the German institute ZEW business environment will be the most interesting event for the current week. They forecast the index decrease which can negatively impact the euro, as it indicates, that Germany has less force to pull the whole monetary unit on its shoulders. Also, the ECB President Mario Draghi’s speech is worth attention. If he confirms his attitude against the strong euro, the pair may also continue to fall down. The strengthening of the geopolitical risks and a strong macroeconomic statistics from the region are able to send the pair to the first support 1.38, and the next 1.3720.

We can sell if the pair consolidates below the support levels 1.3877, 1.3854. This week main goal is 1.3833.

Pound

The meaningful reports on the UK economy aren’t planned till Wednesday. Therefore, the pound will remain under the influence of the market sentiment. The labor market release is expected on March 19th. Also, the report on the Bank of England Committee on Monetary Policy is expected. Probably, it won’t show anything new. It means, that the pound will be mostly influenced by the unemployment data. The signs of stabilization in the employment sector can provide the British currency short-term support. In the future, the pair will largely depend on the United States newsflow and the geopolitical risks.

Trading Recommendations

There is a strong support level 1.6567, the breach of which will provide opportunities for the medium-term reduction. Still we should not wait for a deep decrease soon.

Yen

We believe that the main this week event is the Fed decision regarding the monetary policy. The recent data shows an insufficient rapid recovery of the U.S. economy. It means, that the regulator, in general, has no reason to accelerate the pace out of the quantitative easing program. A report on the consumer price index is expected. The sales of existing homes at a real estate market will be published on March 20th. Also, do not forget about the data on Fed business activity in Philadelphia and about the report on the number of initial applications for unemployment benefits. If the reports show a positive trend, the pair can recover to the resistance area 102.30.

Trading Recommendations

We can start buying the dollar/yen when it breaks the resistance level 101.60 and 102.03, as well as, its decrease to the support 100.75. The existing downward trend will be cancelled only if the pair consolidates over the significant resistance level 103.75.