Mark Carney and Janet Yellen were expected to be the main highlights of the last week; however, both of them provided no surprises and sounded not very convincing. While both the U.S. Dollar and Pound were highly volatile last week, traders paid their attention to the kiwi and Japanese Yen, as risk-on sentiment prevailed the markets. This week traders' eyes will be focused on British and Japanese currencies.
Last week Janet Yellen testified for the first time as the Chairman of the Federal Reserve. On Tuesday Yellen said that she would not make any drastic changes to her predecessor's monetary policy and would stick to tapering stimulus in "measured steps", even amid recent weak employment reports. While the U.S. jobless rate has declined 1.5 percentage points since the latest asset-buying programme began in September 2012, at 6.6% the rate remains "well above levels" the Fed perceives as consistent with maximum sustainable employment, underlying that the unemployment rate alone is not an adequate gauge of health in the labour market. During the last week the greenback depreciated 0.84% against the basket of major currencies, while traders' attitude is still strongly bullish, as they are purchasing the buck in 66% of the time. Moreover, technical indicators are speaking in favour of the Dollar's appreciation in a longer term.
On Wednesday the cable is projected to be highly volatile, as a bunch of important fundamental data from Britain and the world's largest economy will shake markets. While last week Carney failed to convince markets the central bank will not pull the trigger soon, as they are adjusting their forward guidance, the Pound soared 1.35% during the last five trading days. Taking into account policymakers are constantly monitoring the performance of the nation's labour market, an improvement in the number of unemployed people and those who claim for jobless benefits will push the Sterling even higher. Moreover, Tuesday's inflation report will shed some light on the BoE's future moves. On a weekly chart the cable has finally penetrated the upper boundary of the ascending triangle that was 270-bar long. Despite the fact several weeks ago the pair has performed a throwback, a decline in trading volume is confirming the breakout. Keeping in mind potential bullish bias in the Pound, the pair can head towards monthly R2 at 1.6832 in the long-term perspective.
As it has been already mentioned, the Japanese Yen can be worth paying attention this week, as Japanese policymakers are gathering on Tuesday. Though they are not projected to introduce any changes to the monetary policy, they can revise programmes that are aimed at easing credit conditions to commercial banks. Moreover, Kuroda can express his confidence in achieving 2% inflation as planned and praise Abenomics, hence, sending the Yen higher. In this case, the EUR/JPY pair can move back to a recent low and weekly pivot at 138.55. At the same time, the pair is changing hands around the resistance line of the channel down pattern and taking into account not clearly marked market sentiment, the pair will most likely push back from the current level.