Volatility and lack of consistency has been the theme of the markets over the past 24 hours in the Forex universe as we have noticed quite a few changes in direction for the major instruments we monitor in our daily report. During the morning European session the short-term bias was clear with fresh losses for the Dollar across the board but later in the day the flows reversed and the US currency managed to end the day pretty much unchanged against its peers.
There has been no change in sentiment nor in the fundamental drivers behind the US Dollar to cause this retreat so we need to be very cautious when assessing what’s next. It is our opinion that the bias remains bullish in favor of the US Dollar and the recent losses merely represent a correction for the overbought US currency that will look to put the pressure back on the rest of the majors pretty soon.
The focus yesterday was mainly on Europe though and the release of the IFO Survey that printed surprisingly higher than expected showing that there was an increased amount of enthusiasm among German business owners during the previous month. And we’re using the past tense intentionally as the survey was conducted before the VW scandal that will undoubtedly take its toll on the German industry sector.
As a result of the surprise rise in the IFO Survey the Euro enjoyed fresh gains that propelled it to the 1.1300 level but these gains were short-lived. Immediately after hitting the 1.1300 mark the Single currency reversed and retreated below the 1.1200 area where we find it this morning trading around 1.1160. As we mentioned above the bias remains bearish for the Euro and even though we find it difficult to see any significant price action today we should expect more volatility next week.
The Cable was equally unstable with the Euro but within a significantly narrower range as the UK currency came off its 1.5200 lows to try to overcome the 1.5300 resistance area but with no luck. The rest of the day involved a pullback to the 1.5200 support floor and the Cable is now trading between these two important price levels. As we mentioned yesterday the Cable has a strong fundamental support so fresh losses might be hard to come by but a spark is needed to drive the currency back higher.
Economic Calendar
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