FOREX market review and forecast for next week (06/18/12 – 06/22/12) by Forex Cloud

The last week opened up with a big positive gap in all the main currencies against the USD but… it all ended on this. The dollar won back its losses on Monday. It was helped by the fears of the economic situation in Spain and Italy. The aggravation of the situation in Europe was caused by Spanish 10-year bond yields leapt above the 7 percent. On Tuesday, the dollar started to fall again before the publication of the ARS percent (Advanced Retail Sales) from USA. Traders expected a surprise, that would of played against the dollar, but it didn't work out – the data came out according to expectations (-0.2%). Till the end of the week, the dollar continued to get cheaper, despite the bad news from Europe. The reason of this was the USD overbuying and closing the short positions before the weekends, when the voting for parliament will take place in Greece. This is a very important event for the Eurozone which will strongly affect the EUR/USD pair, and the other currencies as well. Publications of the FOMC rate, which will take place on Wednesday becomes the next important event in the upcoming week. The rate will most likely stay the same – 0,25%, but we can expect some surprises from Mr. Bernanke's speech.

It is obvious, that because of such an important event, to make a forecast is practically impossible. Therefore I will limit this review to the USD/JPY pair, that does not really depend on the events in the Euro zone. All of last week, the pair was in a horizontal corridor while awaiting the decision of the Bank of Japan for the interest rate, but the main thing, is the information of a possible currency intervention.  The information hasn’t arrived and the pair dropped to the level of 78.61. The results of the elections in Greece can push the pair downwards  in the case of victory of the left block, and can push the pair upwards in the case of a ruling coalition victory. In the present situation, the pair is in the 78.00 – 80.00 corridor, and the breakthrough of this corridor can serve as a strong signal for sale (downwards breakthrough) or purchase (upwards breakthrough).


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