Limited price action in the major instruments we monitor in this report yesterday and with the more important events of the week ahead of us it can only get better. During the first couple of days of this week we’ve seen little from the major instruments as traders remain cautious and want to wait for the really important events before taking any decisions.
We’re talking about the ECB meeting on monetary policy and the press conference that will follow it as well as the Retail Sales report from the UK, both scheduled for tomorrow. Up until then we believe we will continue seeing this lack of commitment from market participants and limited price action in the Euro and the Cable.
Talking about the Euro, the Single currency came off the 1.1300 lows and made an effort to correct towards the 1.1400 area but there is no real backing behind the currency as everybody knows the risk from the upcoming ECB meeting. The central bank is believed to be poised to expand their easing program and depending on the way and the extent they decide to do it in the Euro could suffer from it.
As such we expect further weakness from the Single currency as the only reason it is trading around the 1.1300-1.1400 area is the fact that the Dollar is also lacking fundamental support for the time being. The 1.1300 support floor is the immediate target and should the ECB announce their intention to expand their easing operations then this should be easily give way.
The Cable remained within its usual sideways pattern for yet another day as an early attempt to overcome the 1.5500 ceiling failed. Traders are looking for the UK currency to move to the upside this week as they expect a robust Retail Sales report tomorrow based on the fact that strong wages’ growth and low inflation levels should have boosted consumer demand.
For the time being though the Cable has retreated around the 1.5430 area and is waiting for fresh news to tick higher. We shouldn’t expect too much price action today as the calendar has events of second tier importance at best, we need to remain patient and wait for our opportunity.
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