General market theme
The focus in the currency markets remains on the US dollar after surprising miss on the NFP report last Friday and the change in the US currency’s outlook that brought along. Yesterday dollar bulls were hoping for a vote of confidence in the buck’s outlook from Janet Yellen but the Fed Chairwoman didn’t deliver. Yellen acknowledged the decline in the labor market and here comments hinted on a rate hike being off the table for June and highly unlikely for July. It is clear that the Fed wants to see more job growth before pulling the trigger once more and that is not happening right now hence the dollar will remain under threat for the time being.
Price action highlights
The euro capitalized on dollar’s weakness on Friday but yesterday the currency didn’t extend on its gains, the single currency spent the day trading sideways just shy of the 1.1400 level holding on its recent gains. We would expect a further climb from the euro in the coming days but given the volatility brought forward by the UK referendum traders are playing safe. At any case the bias for the euro is pointing higher at this point mainly due to the fresh doubts over the dollar’s outlook so any breakouts to the upside look attractive to be bought in the short-term.
The cable pushed higher over the past 24 hours after the really volatile end of last week and the UK currency came off the 1.4400 lows to push to the upside. A couple of hours earlier this morning though we saw a huge spike taking place driving the rate almost from 1.4500 to 1.4700 and all the way back, market chatter speaks about a fat-finger incident since there was really no news to trigger any reactions. The bias in the currency pair changes by the day depending on the most recent poll about the upcoming referendum and volatility is expected to remain elevated and given the overnight spike traders need to be extra careful especially today.
Focus of the day
Today’s economic calendar is almost empty of any significant reports and this means that the price action will be driven primarily by fresh news rather than actual figures. Earlier this morning the release of the German Industrial Production levels printed better than expected while traders are eyeing the Eurozone GDP report to get a better idea of the economic climate in the Euro area.
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