The end of QE theme

US Dollar was under much pressure for most of the week as US Economics data reported last week were mostly negative with FOMC minutes showed some members viewed that further quantitative easing is needed.

Singapore widened the trading band of Singaporean dollar to allow faster appreciation of SGD while there are speculations that other Asian central banks will follow.

Bernanke's dovish speech on Friday seemed to have squeezed the last downside move out of the greenback as the dollar recovered impressively on Friday’s US session.

Does it mean that the that dollar is finally hitting a bottom and the markets are getting tired of QE II talks. It's seems that QE II is fully priced in for November meeting and market will start to feel indifferent to any further speculations.

For the coming week, there is a possibility for the markets to trade in some volatile manner as traders are searching for new theme.

For cable, a lot of attention will be on the Spending Review to be announced by the government on October 20. This will be a key to establish credibility on the government on its ambitious austerity plan to cut the worrying budget deficit. BoE minutes will also catch a lot of attention on the possibility of more QE from the bank.

GBP/USD after crossing the 50 EMA from above on Monday was trending downward and found support at previous week low. By Tuesday, the pair moved up aggressively toward swing resistance(SR) level.

By Fridat during the London session, the pair moved passed RI to almost touched T1 Level.

This week, I am expecting the pair to test support at 1.5888. If the pair managed to get through the resistance of the previous high of 1.6106 the next resistance point is at 1.6240.

BOJ instigated the quantitative easing policy.

The main currency theme this week is Central Bank's quantitative monetary easing. It all started when on Tuesday The Bank of Japan(BOJ) accelerated it easing policy as economic outlook deteriorated. The central bank cut the collateral overnight call rate to 0-0.1% from 0.1% and decides to create a 5 trillion yen fund to buy government bonds and other asset.

BoJ is seen by many as just a start of another wave of easing from world major central banks. The Fed and BoE are both expected to follow in near term. Euro is somewhat supported by speculation that ECB will only have the unlimited funds to maturity until early next year and the bank has not hinted on extension yet.

BoE policy makers opted to leave both interest rate and the Asset Purchase Facility unchanged at 0.50% and 200 billion pounds respectively, inline with forecasts on Thursday.

In US, disappointing employment data spurred speculation that Fed might opt for an aggressive QE II rather than a modest one to boost job growth and economic recovery. Bad US data means more likelihood of QE, which is USD negative.

In Asia, Central banks including the CBC, BSP, BoK, & BNM (Taiwan, Philippines, South Korea and Malaysia respectively) were rumored to be actively participating in the FX market in order to stem the ebb and flow of trade.

GBP/USD has been on the uptrend since Thursday of the previous week as US dollar weakened . In the first three days, the pair was unable to break through the previous week high of 1.5921. By Thursday, the pair managed to penetrate 1.60 level and touched the target resistance level at 1.6018 before taking a breather to a low of fibo 61.8% at 1.5825.

The short term outlook for the pair is still bullish with a penetration above the previous high of 1.6018 is expected to be met with resistance at 1.6118. Near support level is at 1.5852 with next support ance at last week’s low at 1.5751.

GBP/USD

The ringgit consolidate below 3.1125 despite almost all major currencies appreciated against the Us Dollar. It we look at USD/SGD pair, it has been steadily tracking downward. This clearly indicated that BNM has been intervening in the fx market.

With central bank manipulation is quite a task to determine the ringgit movement. However, the pair look to be consolidating waiting for any BNM action or the effect of US dollar venerability.

USD/MYR

USD/SGD

USD weakened but ringgit and cable hardly moved

With major currencies showing very bullish tone against the US Dollar, the ringgit performance against the US Dollar is quite tepid. This could be some intervention by Bank Negara as USD/MYR pair ranging between 130 pips last week. The immediate trend of the pair is still bearish and resistance is at 3.0922 with support at 3.072.

Cable has been consolidating within a tight range of about 100 pips in the early of the week before it was capped at 1.5921 at early London session on Thursday. It then fell sharply to 1.5669. Cable was talked down by thoughts about new quantitative easing. With a doji candle formed on the weekly chart, Cable is now on the crossroad. The coming week could shed some light on cable immediate trend. On intraday basis, Friday rebound from Thursday fall is expected to continued. Resistance is seen at Friday high of 1.5872 with the next resistance at 1.5937. Support is at 1.5767.

GBP/JPY is still trending downward. The intraday support is at 131.48. A break of 131.48 will bring the pair to 130.75. Resistance is at 132.45.

USD/MYR

GBP/USD

GBP/JPY