Both the EUR/USD and the USD/JPY went in favor of the dollar last week, but didn’t make the big breakouts. This first week of March, with heaps of economic figures, could make them break out. From noon on Thursday, expect 24 hours of wild price action.
The most popular pair, EUR/USD, went down last week. It was trading in a 400 pips range, between 1.26 to 1.30 throughout the week. EUR/USD began at 1.28, and finished at 1.2660. All in all, it didn’t make a big move, but made 140 pips downwards.
An initial support line appears at 1.2530. The big support is at 1.2330, which was the low of October 2008, when the global crisis was storming in. 1.2330 was last seen in April 2006.
This week supplies an interest rate decision in Europe and the Non Farm Payrolls in the US. These two huge events occur on Thursday and Friday afternoons. Trichet could surprise with a bigger rate cut than expected. A European rate of 1%, instead of today’s 2%, could be a shock to those following Trichet’s slow moves.
So, if the EUR/USD is low near these events, it could make a big move and dive below support levels. Of course, if it stands around these lines on Thursday, it could also retract back upwards, but I do believe that the Euro is going down.
Learning from the past, note that the big breaks could happen within several hours of the publications. Many times, these shifts happened in the late afternoon (GMT), 4 or even 6 hours after the data release.
In this case, the pair already made a move upwards, by breaking the 94-95 zone. But the it went up quite slowly, and made a long rest before approaching the 100 line.
USD/JPY went about 400 upwards last week, from 93.49 to to 97.52. The highest point last week was 98.70, a safe distance away, 130 pips from the magic number.
Not too much economic news is expected from Japan this week, so the pair depends on traders’ sentiment and on US data, which is pumped throughout the week ,with major releases every day.
Watch out for the Asian session in the late hours of Thursday night and the early hours of Friday morning. If the Euro makes its move, the Japanese Yen could follow.
It doesn’t have to be directly related to any Japanese data or to the actual release of Non Farm Payrolls on Friday afternoon. Traders in Japan could ride the dollar and add another digit to the USD/JPY.
Exciting week in Forex
All in all, this will be an exciting week in the forex market.