USD: Bullish

Lower-yielding currencies such as the U.S. dollar could gain support this week as pairs are trading cautiously, awaiting more updates from Cyprus’ bailout situation. 

Only a few U.S. reports are due this shortened trading week as the durable goods orders, CB consumer confidence, and existing home sales numbers are set for release later on. Fed Chairman Ben Bernanke is scheduled to give a speech during today’s U.S. session and possibly emphasize the central bank’s focus on economic data, namely inflation and employment figures, in setting monetary policy.

EUR: Neutral

Euro traders are on their toes waiting for an actual bailout deal that will be approved by lawmakers in Cyprus. Their plan of asking for additional liquidity from Russia is no longer an option as the country rejected their request for more funds to shore up Cyprus’ troubled banks. Officials are now looking into issuing emergency bonds, nationalizing pension funds, and taxing deposits in order to secure the necessary funds. The lack of a proposal within the day could push EUR/USD back in selloff mode.

GBP: Bullish

Thanks to the BOE’s decision to keep asset purchases unchanged, the pound enjoying rallies against most of its counterparts. Current account and final GDP figures are on tap this week but these aren’t likely to cause huge moves among pound pairs. For today, the British pound could continue trading on improved sentiment as other European currencies are dealing with their domestic troubles.

CHF: Neutral

No major reports are due from Switzerland for today and for the rest of the week. It seems that the franc is also being weighed down by the brewing Cypriot debt crisis as the euro zone country struggles to come up with a bailout deal and avoid a default. While Switzerland isn’t part of the euro zone bloc, the threat of a contagion among European countries still poses a threat to the country. In the meantime, the SNB’s commitment to defend the EUR/CHF peg continues to keep franc rallies at bay.

JPY: Neutral

Kuroda’s speech turned out to be a huge disappointment as the new central bank head declined to divulge details on his monetary policy plans. He did mention that “bold quantitative and qualitative” measures will be put in place to ensure that Japan wards off deflation and the yen doesn’t appreciate too much. There are no major events in Japan this week, which suggests that the yen could trade on risk sentiment.

Commodity Currencies (AUD, CAD, NZD): Neutral

Only Canada and Australia have economic events for this shortened trading week. Canada is set to print its CPI figures and possibly report a rebound in inflation. These CPI releases don’t really have a huge impact on USD/CAD but it could spark enough volatility for day trades. Meanwhile, RBA Governor Stevens is set to give a testimony tomorrow and probably emphasize that there is no need to ease monetary policy for Australia in the near term.

By Kate Curtis from Trader’s Way