The major instruments we monitor in our daily reports remained on the same tempo for yet another day this week illustrating smooth trading action and lack of follow-through. As we have mentioned in our previous reports the event of the week is the release of the NFP employment report from the US on Friday and investors seem to be keeping quite up until then.
Our estimates make word for a strong performance for the domestic labor market in the US and as such we expect the Dollar to benefit from it but it is clear that traders are keeping their guard up and don’t want to commit into any serious trades as we draw closer to the report. The significance of the report itself goes without saying as we’ve have explained again and again the way it can affect Fed’s mind about when to raise rates.
Taking a look at the limited price action of the last 24 hours, the Euro looked to turn lower but ended the day unchanged against the US Dollar. The Single currency found support around the 1.1200 area but failed to print a new high which could hint towards a potential reversal in favor of the Dollar ahead of the NFPs.
Today the release of the Eurozone inflation levels could prove to be a good spark for traders to start building pro-Dollar positions if the report prints worse than expected and the Euro loses ground against the Dollar. The 1.1100 support floor is always the focus area to the downside while any moves higher seem to be capped by the 1.1300 resistance.
Similar to the Euro, the Cable traded in the same manner it has been doing over the past 8 trading sessions. The UK Pound remained under pressure and continued its decline even for a small percentage but the important thing to keep in mind here is that we’ve had almost 2 weeks without a correction.
We expect that to end soon as the Pound should be extremely oversold at this point and cannot sustain such a selling bias for too long. When that happens we should expect a hefty correction rally to the upside and the 1.5300 area seems like the first target to focus our trades. Today the only piece of news for the Pound is the GDP reading but that doesn’t mean the correction can’t come at any time so we need to be prepared.
Economic Calendar
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