US session review:

Europe’s 18-nation currency traded at almost a one-month low after European Central Bank Vice President Vitor Constancio said its recent strength has had an impact. ECB President Mario Draghi said last week that policy makers would be “comfortable” with further stimulus next month. 

The pound rallied as the Confederation of British Industry raised its growth forecast, bolstering estimates for a Bank of England interest-rate increase.

The yen weakened against most of 16 major counterparts as Japan’s current-account surplus shrank to the smallest on record and U.S. Treasury yields increased, reducing the advantage of owning Japanese assets.

EURO

Another Refi Rate cut is now likely at next month's ECB meeting. That seems a reasonable interpretation of Mario Draghi's comments last week. EUR/USD fell from 1.38 to 1.35 in the 2 weeks before the ECB last cut rates in early November, fell below 1.34 on the news, but was back at 1.38 by mid-December.

That may be a decent blueprint for the next few weeks/ However ECB’s Constancio and Nouy hinted that it was too early to speculate about the central bank's actions at the June meeting.

EUR/USD recovered from May 9 lows on $1.3740 and currently holds at $1.3755. Initial resistance comes at $1.3800 (23.6% Fibo of the recent fall), then - at $1.3840 (38.2%) and $1.3870 (50%). Below $1.3770 support comes at $1.3670 (Apr 4 lows).

POUND

The largely unrevised GDP and CPI inflation forecasts in this week's Inflation Report are much more influential in determining the near-term policy signal. An ongoing projected inflation undershoot will weigh against any pre-emptive rise in Bank Rate and may also see GBP trade more softly than it has of late given the level of long positioning.

GBP/USD currently holds at $1.6890. Rate still holds below $1.7000 with initial resistance is around $1.6900/10 (50% Fibo of the recent decline). Below $1.6830/20 support comes at $1.6780 with a break under widens losses to $1.6700 and around Apr 15 lows on $1.6660.

YEN

The yen has weakened modestly in the Asian trading session with USD/JPY rising back towards the 102.00-level.Still the yen continues to remain in a very tight trading range displaying no directional bias over the last three months.

USD/JPY holds above Y102.00 (minor resistance). Further resisatance is around Y102.75 and Y103.40. Stronger one remains at Y104.30/80. Below support comes at Y101.30 (Apr 10 lows) and Y100.70 (Feb 7 lows).

Source of information>>

More information>>