Last week seven out of nine major currencies either gained or lost more than 1%, making them highly attractive for traders. Amid main gainers were the single currency, Pound, Swiss Franc and Swedish Krone, advancing 1.22%, 1.15%, 1.12% and 1.70%, respectively. In contrast, Japanese Yen, Aussie and Kiwi lost 1.23%, 1.82% and 1.55%, correspondingly.
The most traded currency pair, EUR/USD, has moved to its highest level since October 31; however, was not able to move further, suggesting weekly and daily resistances are holding the pair. The shared currency was boosted by the positive data from Germany and Spain, as fourth-largest economy in the Eurozone has finally emerged from a recession, while a series of the better-then-expected macroeconomic reports are suggesting Europe's largest economy will be building up steam in the coming months. The data from the U.S. had little impact on the pair, and, as a result, the greenback advanced only 0.06% over the week. During this period, EUR/USD is likely to be even more volatile, as policymakers in Europe will gather to discuss the monetary policy. Mario Draghi is expected to refrain from any additional stimulus measures. Even ECB council member Jens Weidmann said that is was not prudent for the Eurozone's central bank to signal its next policy decision immediately after the recent interest rate cut. Amid a lack of fundamental data from Europe, the EUR/USD is likely to be driven by news from the world's largest economy. The unemployment rate is expected to fall to 7.2%, while the non-farm payrolls are likely to ease back to 185,000 in November, from 204,000 a month earlier. While the labour market could disappoint the Fed, analysts believe the economy itself will accelerate to 2.9% in Q3 from the previous estimate of 2.5%, suggesting the economy is strong enough to continue developing without any stimulus. Taking it all into account the EUR/USD is more likely to drop back to 1.3330 (weekly S2, November's low), rather than inch higher to 1.38. At the same time, 60% of traders are holding short positions, expecting the pair to depreciate, while 59% of pending orders in a 100-pip range (from 1.3611) are placed to sell the pair, ready to provide additional support to bears.
Also last week the cable hit 1.6374, almost reaching this year's high, following the highly anticipated press conference of the central bank Governor Mark Carney in London. The Governor addressed growing concerns over a housing bubble, by saying the BOE has no power to either curb or stop government schemes, like Help to Buy; however, they are planning to end the incentives for mortgages in a package designed to fight risks to the financial stability. It means the period of cheap money is coming to an end, supporting the case of a sooner-than-expected rate hike from the BOE. During the next five trading days the Pound can move even higher and add to last week's gains, as it is a period of reports from key sectors of the U.K. economy– manufacturing, construction and services. Moreover, on December 5, the BOE meeting is scheduled, where Carney can either adjust the monetary policy or shed some light on future plans. Therefore, the cable can renew this year's high and move toward weekly resistance at 1.6476.