Bernanke To Explain Economic Policy, BOJ Meeting To Impact Yen

On May 22nd Mr. Bernanke will be heard by the Fed, and will show the state of the economy, in addition to the publication of the minutes of the recent policy meeting (FOMC). It's obvious that markets want to understand whether the policies of Quantitative Easing are really close to the end and for this reason, every word of Bernanke will be tightly analyzed. Among the other data of the week, we can find: durable goods orders on May 24th, the sale of existing homes on May 22nd and new homes on May 23rd.

GERMAN IFO AND BOE MINUTES
After the disappointing data on the European GDP in the first quarter, the major focus of analysts will be concentrated on the manufacturing PMI data of May 23rd, but especially on the German Ifo on May 24th. As for the Fed, the minutes of the recent meeting of the Bank of England will be a major market mover for the Pound too, especially after the statements of the central governor King, who said to markets that real interest rates cannot be negative forever, a first indication of a possible removal of the English QE in the coming months.

THE BOJ AGAIN
The Bank of Japan will arrange its regular policy meeting on May 22nd with some achievements (the devaluation of the Yen and the GDP of the first quarter, positive and better than what expected ) and some unknowns (the end of the deflation and interest rates on the rise). This meeting will create volatility on the Yen, that has reached rather important levels of resistance against the U.S. dollar and the Euro. EUR/JPY might represent an adequate return risk. The rise has indeed repeatedly touched the 50% of retracement of the entire long-term bear market (132.25) without overcoming it in the closure of the week. The overbought oscillators comfort us about the chance to enter short.

TRADE OF THE WEEK
Next week will be quite an important one for South Africa due to the expected inflation data on May 22nd , but especially due to the decision on interest rates on May 23rd. The monetary policy of the SARB has been accommodative for some time and this element supports the weakness of the Rand now close to the top of March 2013 on UsdZar. This week, however, we want to focus on another cross: ZarJpy. As we can see from the graph, a sequence of three lower highs has just occurred, with the third one (11.25) who carried out the so-called long throw before returning quickly in area 10.90. The resistance is also notable as the weekly chart shows and the divergences with the oscillators are obvious. Betting on a short ZAR/JPY due to the previous considerations on EUR/JPY does not seem to be a gamble.