On Friday the price action in the major instruments we monitor in this daily report remained on the same theme of volatility and inconsistency that we’ve seen in recent sessions. With the Dollar being in a state of weakness on the back of the NFP report and with renewed concerns about the domestic economy as the minutes from the last Fed meeting revealed the playing field has changed a bit.
The other major currencies have been doing their best to take advantage of this weakness and traders are looking to benefit from these rallies higher while they last as everyone knows that from a fundamental point of view the Dollar has a better medium-to-long term outlook than the likes of the Euro or the Pound.
However looking ahead, this week could be another interesting series of sessions with important reports pending for release. The inflation levels from the UK will play a major role in extending the current relief rally on the Pound and the Advance Retail Sales from the US could reveal further weakness in the US that will fuel another round of sell-off. Of course, the ZEW Survey is also an important metric that could limit any gains that the Euro will have against its US peer.
Talking about the Euro, the Single currency has rallied on Friday above the 1.1300 barrier on the back of the concerns voiced on the Fed minutes and this morning is trading at the 1.1360 area. The Euro has seen good gains over the past couple of sessions in light of the weakness in the Dollar but from a fundamental point of view these levels seems hard to sustain. Today the calendar is empty but with tomorrow’s ZEW report expected to print in a bearish manner we would be on the lookout for reversal hints to the downside on the Euro at the beginning of the week.
The Cable will also come in focus early this week as the release of the inflation levels tomorrow will attract investors’ attention. There is some distance between the bullish rhetoric coming from the BoE recently and the string of bearish results and reports from the domestic economy and that could provide the necessary friction for some serious price action in the Cable. The currency is consolidating temporarily between the 1.5300 and 1.5400 levels and a breakout from this pattern will show us what’s next for the UK currency.
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