This week FX traders weigh currency fundamentals and technicals amid fresh uncertainty surrounding the Malaysian airliner shot down over Ukraine. John Hardy, Saxo Bank’s Head of FX Strategy, analyses the possible developments in FX this week. He points out that EURUSD and USDJPY are trading near key technical support – 1.3500 in EURUSD and 101.00 in USDJPY. If both of these supports fall this week, EURJPY will be the big mover. EURUSD is currently trading near 1.3520 and USDJPY just above 101.30 and EURJPY near 137.00.

The downed airliner in Ukraine introduces a far higher risk that the EU takes a far sterner approach to Russia. On Tuesday, EU ministers will have a meeting regarding discussions to impose even tougher sanctions on Russia. John Hardy worries that worsening tensions between the EU and Russia will keep European bourses nervous this week.  Potential sanctions also raise questions about whether the Russian gas supply to Europe could eventually be threatened.

And many traders have been moaning about the summer slump in trading activity, could that be about to change? According to John Hardy we now have record low volatility. But he believes that the market is showing signs of more energy after the FEDS guidance on its likely actions if US data continues to strengthen.  According to John Hardy the key event risk for determining whether FX market activity continues to slump will be the FOMC meeting outcome on July 30th.