In my previous piece last week, I saw the best possible trades for the coming week as short of the Forex currency pairs GBP/USD and AUD/USD. The results were not good, with GBP/USD rising in value by 1.51%, and AUD/USD also rising in value, by 1.21%, producing an average loss of 1.54%.

The most important development in the market last week was the recovery in the U.S. stock market from its recent corrective low, with more than half of the S&P 500 Index’s losses being recovered now. The market also saw the U.S. Dollar resume its downwards movement in line with the long-term trend, so overall, it seems to be a story of trends resuming. Many analysts note that there has been no notable change to underlying economic conditions, except for the 10-year bond yield rising towards 3%.

As for other currencies, the Japanese Yen is in the spotlight, as it breaks up and makes a new 15-month high price against the U.S. Dollar, and a new 3-month high price against the Euro. The Japanese Central Bank is not sending out any signals in favor of this strengthening, and there is speculation that some of the Yen’s rise may be caused by Japanese investors repatriating overseas investment, yet that is questionable. It is true however that the market consensus sees the Bank of Japan as likely to begin tightening monetary policy later this year, even though dovish senior staff are being left in place, and the Finance Minister remarking last Friday on the importance of exchange rate stability and the possibility of market intervention.

Fundamental Analysis & Market Sentiment

Sentiment on fundamentals is hard to read, except on the U.S. stock market where it seems both are aligned with bulls. The two factors affecting sentiment in the Forex market over the course of this week are likely to be the FOMC Meeting Minutes release, followed by the British second GDP estimate, which could affect the U.S. Dollar and British Pound considerably.

Technical Analysis – U.S. Dollar Index