Last week markets were surprised by Mario Draghi's decision to trim benchmark interest rate amid weak inflation and gloomy outlook, making the Euro the major underperformer. In contrast, the Kiwi was the main gainer, advancing 1.22% versus other major currencies during the last five trading days. Financial markets were mostly driven by the fundamental news, while this week is expected to be not as volatile.
On Tuesday Statistics New Zealand said nation's jobless rate fell to 6.2%, while economy added more jobs than initially expected. On November 5 NZD/USD soared 115 pips, while a day later it hit 0.8415. Currently the pair is range-bound between two Fibonacci retracements—at 0.823 and 0.835. The fact that 74% of traders are holding short position is suggesting a move towards Fibo 38.20% is expected, and the pair can easily move down by 90 pips.
Financial markets were shocked on Thursday following the ECB press conference, after which the single currency plummeted to 1.329 against the greenback. While analysts were betting on no action from the European Central Bank and were expecting another bold statement, a pledge to "do whatever it takes to save the Euro", Mario Draghi made an unexpected move and slashed the main refinancing rate by a quarter point to a new all-time record low of 0.25%. While analysts believe the Euro would recover in the mid-term, in the nearest future the most traded currency pair may begin a period of consolidation. In the meantime, the market sentiment towards the common currency is neutral, and the pair may fluctuate between 1.326 (monthly/weekly support) and 1.3596 (200-bar SMA (4H) and weekly pivot). However, the pair has the potential to be volatile due to the fact that Bernanke's speech, EU GDP, as well as the U.S. trade balance are all scheduled this week. Taking into account that the world's largest economy expanded more than expected in the third quarter, and the labour market proved to be resilient to the 16-day long government shutdown, Bernanke may provide some hawkish comments, and even give a hint on when the Fed will start tapering the stimulus programme, sending the greenback significantly higher.
Another report worth paying attention is the Japanese GDP on Wednesday, November 13. It is expected to show the economic growth slowed to 1.7% in the third quarter, from 3.8% in the previous three months, however, considering Kuroda's and Abe's confidence in their policy, as well as the recent strong fundamental data from the world's third largest economy, stronger-than-expected GDP data can be expected. Nonetheless, traders remain strongly bullish on USD/JPY, as 70% of positions are long, while the Japanese Yen is sold in 68% of all cases in its crosses. Hence, USD/JPY is trading in a triangle pattern, right at the level of 200-day SMA, and taking into account market's attitude towards the pair, a shot towards 100 level during the week appears to be probable.