In my previous piece last week, I saw the best possible trades for the coming week as long of the S%P 500 Index, short of the USD/JPY currency pair, and half-size short of the Forex currency pairs GBP/USD and EUR/USD respectively. The S&P 500 Index rose by 0.36%, but the USD/JPY rose by 0.55%, while GBP/USD fell by 0.45% and EUR/USD by 0.93%. The results were not good, producing an average loss of 0.29%.

The most important development in the market last week was the continuing 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 so far. The market has seen the U.S. Dollar undergo a consolidation within its downwards movement, casting some doubt on the long-term bearish trend in the greenback. Many analysts note that there has been no notable change to underlying economic conditions, except for the 10-year bond yield rising towards 3%. It was a very quiet week in the market overall.

As for other currencies, the Japanese Yen remains in the spotlight, as it recently broke up and made 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 recently remarking last upon the importance of exchange rate stability and the possibility of market intervention.

Fundamental Analysis & Market Sentiment

Sentiment and fundamentals are 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 testimony before Congress by the new Chair of the Federal Reserve, and Preliminary GDP data, followed by a speech from the British Prime Minister on Brexit.