Volatility in the major instruments we monitor in our daily reports remained elevated yesterday and even though it was a Monday which are usually slow the price action we saw hinted us towards an action-packed week. The fact that today and the coming days we will have the opportunity to receive fresh news and reports from around the globe also contributes to our assessment that his will be an interesting week for the financial markets.
Today the focus will be mostly on Europe as two very important reports are pending for release and they could take their toll on their respective currencies. The release of the inflation levels from the UK and the ZEW Survey from Germany and the Eurozone are bound to trigger a reaction from traders who will look to capitalize on them.
The inflation report from the UK is a closely monitored metric since the BoE has voiced their concerns over the low inflation levels and mentioned that they would like to see a similar improvement on this as they see in the employment sector. The release today is expected to print in a bearish manner and that could drive the UK currency lower, the Pound has topped around the 1.5350 area and a downwards break of the 1.5300 support barrier could open the door for a retreat lower.
At the same time the ZEW Survey findings are also important for the Euro that has consolidated in a top formation just shy of the 1.1400 level. The survey that monitor business conditions and confidence in Germany and the Eurozone is expected to print lower this month on the back of the challenging conditions in Europe and the news of the German VW scandal.
As such the Euro could come under pressure today and some of the gains it has enjoyed on the back of Dollar’s weakness could go away. The important pivot area lies around the 1.1350 level and losses below this barrier could send the Euro to retest the 1.1300 support floor. At the same time however we need to remain focused on the short term on all major instruments as we could see a lot of volatility in the coming days with more reports coming our way.
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