Yen and Dollar to strengthen next week?

The longer term picture for Japanese Yen and US dollar are quite bullish. You hopefully noticed that the most recent strength in US dollar index was basically due to the fact that Yen was weak. You could actually see dollar weakening in most pairs and strengthening on the Yen and dollar index strengthening at the same time. This has been changing lately. You can see how dollar weakened this weak across most currency pairs, not necessarily Yen, and dollar index collapsed. Anyway, we have very rich week upcoming. Major economies will announce their interest rates decision: US, Europe and UK. I do hope to see some ‘fireworks’. 

On the one hand aud/usd and nzd/usd displaying clear technical bullish patterns. On the other US dollar index is close to its’ support. What does that mean? Being a technician I am ready to go either way. Commodity currencies look bullish against most other currency pairs too: Euro, British Pound and Swiss Franc. I am thinking about going long in aud/usd and shorting gbp/aud, gbp/nzd as well as eur/nzd and eur/aud. It looks like major time for correction in these pairs has come. And the timing for that seems to strike next week. Get ready and do your own analysis over the weekend.

Market expectations for Thursday/Friday

This Thursday, the U.S. will celebrate Independence Day, investors in Europe will focus on the European Central Bank decision to cut base rate or not. Most market participants do not expect interest to be cut, but it is expected that the M. Draghi (the president of ECB) will continue to highlight the main goal - to maintain low interest rates in the Euro zone.

 
On Wednesday primary producer confidence index of July in the Euro zone will be published. It is expected that it will remain the same as in May, and reach 48.6. This reflects market expectations that the greater part of manufacturers in the Euro zone still sees signs of market contraction.

Bank of England decisions

On Thursday, the Bank of England, as well as the ECB will announce a decision on the base interest rates. Market participants also expect that the base interest rate would be reduced, which currently stands at 0.50 percent. However, investors will closely monitor the press conference which will be held after the meeting. For the very first time, New England's central bank chief Mark Carney will speak publicly. He was the leader of Canada's central bank for more than five years.

U.S. expected labor market indicators

While the U.S. markets will be closed on Thursday - the country will be celebrating Independence Day - market participants wait for the first quarter U.S. macroeconomic data announced. Without a doubt, the most important of them will be published on Friday - the U.S. labor market data. Analysts believe that in June new jobs were created in the U.S., but slightly less than in the month of May, 165 thousand. And the unemployment rate was down from 7.6 percent. to 7.5 per cent. It is expected that these figures reflect the current U.S. Federal Reserve System (FED) position that the U.S. unemployment market is slowly recovering, and sooner or later the Fed should begin to reduce U.S. economic stimulation.

Bullish fundamental facts from Europe

ECB expressed its’ ‘sincere’ desire to address the European crisis and is again willing to do anything it takes to stabilize the region’ economy. These comments after interest rates announcements are very important as they usually give momentum for currencies at least for a few weeks. These are periods of time when a trader can accumulate a big position in a currency that is about to strengthen and keep it for a few weeks to make nice profits. That is exactly what happened in eur/usd or eur/jpy pairs. These macroeconomic news put Euro back on its’ uptrend and this tendency of Euro strength may continue for a few weeks.

I will repeat myself again that one should only trade in the direction of the main trend and never against it. So, after ECB and BOE announcements of interest rates have been made one can expect Yen and US dollar to weaken and Euro, Pound and commodity currencies to strengthen. Just be sure not to risk too much, nor to overtrade. These things never increase your profits. Vice versa, it impedes you to take the best possible trades that are on the table. Stay patient and try adding to your position on dips.