Range trading and consolidation remains the main theme in the major currency markets as traders and investors are biding their time before the most important event of the week which will be the release of the US jobs report on Friday. Yesterday the major currency pairs enjoyed another session of increased volatility but again within a limited range capped by their technical barriers.
From a fundamental perspective market participants regard the Non-Farm Payrolls report as an important precursor on whether the Fed will move forward with raising rates in the coming few months and they prefer to receive a confirmation of that by an encouraging reading, especially on the wage growth component.
At the same time the uncertainty surrounding the Euro with the Greek debt issue being one of the major risk factors and the UK elections coming soon creates a lack of commitment at this time hence the reluctance to get behind major trades.
Taking a look at the technical outlook of the majors, the Euro spent another day range-trading between the 1.0700 and 1.0800 barriers as traders are receiving better than expected reports from the Euro-zone. At the same time though rumours the Greece won’t be able to fulfil their coming payment obligations are creating an uncertain environment that doesn’t allow the currency to rally.
The Cable was on a similar mode and any early hopes that the currency will make its way towards the 1.4900 area were dismissed in the morning when the UK currency dipped to the 1.4750 support again. The rest of the day was an attempt to recapture the previous levels but this points towards a reluctance from traders to really get behind any moves on the Cable at this time.
We believe that we could see a change in tempo as we move closer to Friday’s NFP report and indeed any surprises or important developments in the US labour market will have the potential to drive the major currency pairs out of their current trading ranges. Moreover we think that any conclusions on whether the Fed will still be on track for a rate hike after Friday’s jobs figures will shape the short-term outlook for the main instruments we monitor daily.
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