On Friday the price action in the major money markets was more or less smooth as we had little in terms of fresh news and volatility was on low levels but this is not to mean that we weren’t surprised by it. During the recent couple of weeks the theme of the markets has been the fresh round of bullish data and reports from the US that should have worked in favor of the Dollar.
However the US currency is facing stern resistance from the rest of the major currencies and most importantly the European majors. The case of the Euro is quite peculiar since the sentiment for the Single currency is bearish on the back of the protracted stalemate between Greece and its creditors that undermines the strength of the Eurozone as an institution.
Taking a look at the price action itself, during the last 24 hours of last week we noticed renewed strength from the European majors that stood their ground against the advancing Dollar. The Euro managed to end the day higher making its way towards the 1.1300 area while the Cable touched the 1.5600 level. However it is important to remain calm and look towards this week’s expected developments and how they will influence the currencies.
The Federal Open Market Committee meeting on interest rate policy on Wednesday is the key event of the week and it expected to attract everyone’s attention. This will be an opportunity for the Fed to prepare the markets for a higher interest rate policy in the coming months and that will take its toll on the Dollar and the rest of the majors. We remain bullish towards the US Dollar and we believe that Fed boss Yellen will pave the way for a stronger Dollar ahead.
The week though starts slower and we need to see how the Euro and the Cable will trade up to the FOMC meeting. This morning the Single currency is hovering around the 1.1200 area and refuses to decline regardless of the bearish developments with Greece and its debt negotiations. We need to remain cautious and wait for a clear break either of the 1.1150 support or the 1.1300 resistance before making up our minds on Euro’s technical outlook.
The Cable has a much clearer outlook as it has been going from strength to strength and it now finds itself shy of the 1.5600 barrier. This week’s fresh data will be key to help investors decide whether the rally has more room to grow or a correction is due. For the day ahead we expected limited price action as the calendar is relatively empty.
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