Friday's moves in the Forex market were driven by expectations that BoJ might to further ease monetary policy and extend negative interest-rate loans to banks when it meets for a two-day monetary policy meeting later this week. The BoJ easing speculation drove a massive rally in the US Dollar against JPY and the rippling effect was also felt by some other major currencies as well, Euro in particular.
Despite of Friday's in-line with consensus estimates Euro-zone PMI readings, the EUR/USD pair extended its reversal from nearly 1.1400 mark and dropped to a 3-week low of 1.1218 as ECB President Mario Draghi, on Thursday, had reopened doors for fresh interest-rate cuts. The pair has now recovered from lower and is trading with some strength.
Meanwhile, the GBP/USD pair, after showing resilience to last week's weak economic data, managed to decisively break-through 1.4400 mark handle on the back of declining expectations a UK exit from the European Union. The pair on Monday opened gap higher to touch its highest level since mid-March, before retracing back to 100-day SMA near 1.4430-20 region.
Monday's economic calendar features very little in terms of any fresh triggers but traders would keep an eye on German Ifo Business Climate and New Home Sales data from the US. The key trigger for move in the near-term would be the BoJ and the Federal Reserve meeting.
Technical set-up
GBP/USD
The pair has clearly broken through a short-term descending trend-line resistance and has subsequently strengthened above 100-day SMA for the first time since Sept. 2015. Hence, from current levels, the pair seems more likely to extend its upward trajectory immediately towards March high resistance near 1.4500-1.4515 area.
On the downside, 100-day SMA near 1.4425-20 area, closely followed by the ascending trend-line resistance break point near 1.4400 mark, now seems to provide immediate support for the pair.
The short-term bullish break-out now seems to suggest that any dip below 100-day SMA support, towards 1.4400 mark, is likely to get bought into.
EUR/USD
Following a strong rejection from 1.1400 handle, the pair now seems to have found some support near 1.1220-15 area, marking 38.2% Fibonacci retracement level of 1.0830-1.1465 up-swing. However, further recovery from lower level might now confront immediate resistance near 1.1265-70 horizontal zone.
On the downside, traders would be eying 1.1220-15 immediate support area, which if breached should drag the pair towards testing 50-day SMA support that currently stands near 1.1185 level.
View the live chart of the GBP/USD
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