Volatility in the currency markets remains elevated even though we’re going through the second week of August, a period that usually traders take some time off their desks. This creates a less liquid environment that magnifies any price action swings even in the most liquid markets hence all of us who remain in front of our screens should be double cautious about where and when to place our trades.
Over the past 24 hours investors were mainly focused on the Euro and the developments in the Eurozone and Greece. The release of the market sentiment ZEW Survey came as a surprise to traders as the main metric printing significantly lower than expected but other metrics of the report surprised to the upside. However the Euro was unfazed by the mixed printing of the report as news of a deal being reached between Greece and its creditors regarding the conditions of the new loan agreement has propelled the currency higher.
The Euro rallied towards the 1.1100 barrier printing an intra-day high of 1.1090 when the news hit the wires and this combined with the recent Dollar weakness on the back of the NFP report that we have been discussing earlier in the week have allowed the Single currency to run quite a rally in recent sessions. From a technical standpoint the Euro seems quite overbought at this point and given the lack of any important news today we could see some consolidation or even a slight correction towards the 1.1000 support floor.
The focus today will be on the British Pound as the main event of the day will be the release of the UK employment report and the key metrics to keep an eye on are the unemployment level and the Average Weekly Earnings. The former is expected to print in steady manner while analysts expect a lower printing regarding wage growth compared to last month, we believe that the market will closely monitor the release that could put pressure on the BoE to think carefully about when to raise rates.
The Cable spent the day range-trading yesterday just shy of the 1.5600 barrier waiting for today’s labour market report to spark some volatility. Should the report surprise to the upside, especially on the wages’ growth component then the Cable should rally towards the previous highs of 1.5670 while a more bearish printing will put the UK currency under pressure and the first support lies around the 1.5500 area.
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