Week in FX Europe – EURO at Yen’s Mercy

Next week is not expected to be as dramatic as this one. Investors were entertained by a commodity market that witnessed mass liquidation and by Friday found gold prices in the mid-point of its weekly range. The price action rebound probably had more to do with the “mass hysterical” downside overshoot hitting some significant long-term support levels followed immediately by a strong physical demand ever since. For the technical analysts out there, it is probably reason enough to suggest that a mid-term floor has been set. Friday’s last gasp from Europe saw the UK’s long-term debt being downgraded by Fitch to AA+ from AAA with Sterling bearing the brunt of the late day news.

The rest of Europe seems convinced that Japan is about to embark on a global shopping spree. Despite the IMF Chief suggesting that the ECB has room to ease monetary policy further could not keep the 17-member single currency down on the week. Reports that the G20 communiqué is essentially the same document released by the members last February has given Japan “the thumbs up” and USD/JPY the ‘green light’ to proceed to and beyond the psychological 100-barrier.

Similar to last time, the document will be seen as giving Japan a pass on “intentionally” weakening their currency. The new BoJ Governor Kuroda said that fellow members understand the case for his country’s unprecedented monetary stimulus. The Governor is adamant that they are not intentionally weakening their currency, the BOJ easing “is for a domestic policy goal to achieve the +2% inflation target at the earliest possible time.” The market should expect Germany’s Schaeuble and Weidmann to be scrutinizing the BoJ’s easing to make sure that it is not FX driven – they would prefer a tighter leash on Japan. However, if it’s domestic driven, then the Germans have no recourse. The EUR is now at Yen’s Mercy.



* NZD Reserve Bank of New Zealand Rate Decision
* AUD Consumer Prices Index
* USD Durable Goods Orders
* GBP Gross Domestic Product
* JPY National Consumer Price Index
* JPY Bank of Japan Rate Decision
* JPY Bank of Japan Monetary Policy Statement
* JPY Bank of Japan Governor Kuroda Post-Statement Press Conference
* USD Gross Domestic Product

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell