The pair that rallied the most, was USD/JPY, as it is more sensitive to fundamental data from the United States than other pairs. On Friday the pair has been trading at 104.59, the highest since October 2008. The BoJ has once again reiterated its pledge to increase the monetary base by 60-70 trillion yen a year, while the tapering buys some time for Kuroda, who seeks for a weaker Yen. Meanwhile, analysts believe the pair can reach 115 level over the next 18 months. At the moment of writing, 55% of traders were holding long positions, while 85% of pending orders are placed to buy the Dollar against the Yen, meaning bulls will receive additional support in case of a further rally. The next key level for long traders is located at 105, while at 105.85 they will face a weekly R3, which is likely to limit appreciation in the foreseeable future.
Despite the abundance of fundamental data from the U.K., the cable was almost unchanged. Obviously, the pair has soared 267 pips in the first half of the week, and after the Fed's decision it has eased back to 1.6349 (week's opening price– 1.6301). Britain's inflation moved closer to the BoE's target, the unemployment hit 7.4%, while retail sales recovered. Moreover, GDP surprised markets on the upside on Friday. All these figures are bolstering the case the BoE will soon start raising interest rates, hence, sending the Sterling higher. Investors, however, suggest stronger Dollar will outweigh news from the U.K., as the Pound is sold in 70% across the board, while their attitude towards the buck is bullish (60%). Taking into account the strength of the Dollar, the cable is expected to head to the south this week, and the potential target for short traders is located at a recent low and weekly S1 at 1.6219, which is just 129 pips below the market price, as market volatility is likely to be subdued due to weak trading volumes on holidays.
Taking into account low trading volumes and a lack of important fundamental data, financial markets are expected to be rather calm this week. However, as always on Thursday, the Labor Department will publish U.S. jobless claims, while the same day the Statistics Bureau will unveil a closely-watched inflation data in Japan.