The US Dollar remains in the center of attention during the first trading sessions of the year having started 2016 in a strong manner. The US currency has been posting gains against its major peers and yesterday was not different with the Dollar printing fresh highs against the Euro and the Cable. The apparent stock market crash in China drove investors to doubt whether the rest of the global stock markets can sustain their current levels which in turn led a flight to Dollar’s safety.
In the next couple of days we should expect even more price action from the US currency as we will have the chance to find out key metrics about the domestic economy including the non-Manufacturing ISM levels and the Non-Farm Payrolls report. At the same time we will also have the opportunity to read the Fed minutes from their previous meeting where it was decided to raise their key interest rate level.
Even though the Dollar has been gaining across the board the upcoming reports are expected to print at lower levels than last month and that could create interesting opportunities. The Dollar could suddenly see a reversal and with traders looking for opportunities elsewhere we could find the chance for some early profits in the new year. Today the focus will be on the release of the ISM Non-Manufacturing levels from the US and the release of the Fed minutes from their last meeting. Earlier in the day though the UK Services’ PMI report will be in focus and if the figures print in a bearish manner the Pound will extend its losses.
Taking a brief look at the price action over the past 24 hours, the Euro was again in a bearish ride and even though the numbers coming from Germany yesterday were better than expected. The Single currency however dropped below 1.0800 and this technical breakout drove traders to follow the rally lower printing a 1.0705 low for the day. Today the Euro will remain in focus and depending on how the US reports will print we could see a further decline or an attempt to correct to the upside with the 1.0800 level appearing as the short-term resistance.
The Cable was also bearish yesterday but the better than expected Construction PMI levels allowed the UK currency to limit its losses and remain afloat around the 1.4650 area. The real test though is today as the Services’ PMI levels are far more important and if analysts’ expectation are correct and the report prints lower than last month’s then the Pound will come under fresh pressure. There is a lack of any strong support for the Pound to the downside and that could magnify any potential rallies lower with the 1.4550 area coming into focus.
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