Price action in the major money markets remained mostly limited yesterday as it is now more than evident that traders and investors have their attention solely focused on the Greek issue and remain extremely cautious ahead of the upcoming referendum this weekend. Their waiting stance became clear after we saw very limited reaction to the US jobs report that was released yesterday and merely moved the markets at all.
The report printed at 223k jobs added in the US economy over the last month pushing the unemployment rate further down but we saw no progress in the hourly earnings component and the workforce participation actually fell. Not a very robust reading but that was more or less expected from the markets after last month’s impressive performance. However it is worth mentioning that this news puts the chance of a September rate hike from the Fed under doubt and the Dollar would normally take a hit from that.
Nevertheless though the US currency remained afloat and actually this morning is trading around the same levels against its major peers, the Euro and the Pound. it is clear that traders don’t want to get heavily involved with any trading ahead of the weekend, given that the US markets are also closed today ahead of the 4th of July holiday. The upcoming Greek referendum has the potential to disrupt the markets when they open on Sunday so we want to warn our readers to remain as much cash-neutral as possible.
Taking a look at the majors’ technical outlook, the Euro is trading just shy of the 1.1100 level this morning having spent most of yesterday treading water around the same area. Market participants are hesitating to take sides at this time and with the Greek vote too tight to call we expect price action today to remain limited and any developments to come after the exit polls reveal what the Greeks decided.
Be prepared for excessive volatility the moment the markets open regardless of the outcome of the vote so we suggest that you limit your Euro exposure ahead of the weekend.
The Cable on the other hand showed some price action yesterday but again towards no particular direction. The UK currency was a bit volatile after the bullish reading of the Construction PMI report and spiked higher briefly but traders will want to find out how the Services PMI levels print today before deciding on the state of the domestic economy.
We expect some volatility and price action on the back of the report today and a positive reading could push the Cable towards the 1.5700 level again.