Friday was expected to be a relatively quieter and calmer session as the calendar was more or less light and traders wouldn’t want to commit at the end of the week but it seems that this wasn’t the case. Even though traders would prefer not to open any major positions during the last day of the week that didn’t mean that they wouldn’t want to exit some of their larger bets as Friday was also the last day of the month.
As such we saw quite a lot of volatility mainly on the major currency pairs that even though they ended the day pretty much unchanged had quite a lot of price action during the final 24 hours of the week. The Euro and the Cable were both pretty active with the Single currency running an impressive 100+ pips rally early in the morning for no good reason only to take it back on the hours that followed.
During the week ahead of us though we expect volatility to remain elevated as there is a flurry of major economic reports and events to take place. The Non-Farm Payrolls report on Friday, the extremely important BoE meeting and press conference to follow on Thursday along with PMI levels and ISM reports will create the perfect environment for traders this week. This combined with the fact that trading volume will begin decreasing as market participants will start leaving for their summer holidays will mean that we should expect a lot of price action during the following weeks.
Taking a look at the technical outlook of the major currency pairs, the Euro spent Fridayrallying needlessly to the 1.1100 barrier during the early hours of the day but immediately reversed its flows after that and settled just below the 1.1000 area. The rally could be attributed to last-day offloading of any positions on the last day of the month as we’ve had no other important developments to spark this price action.
Looking ahead thought the Dollar will be in command this week and its strength will dictate the price action of the currency pair, the focus will be on the US jobs report on Friday but during the week we should also expect price action in response to the ISM and PMI reports. We remain relatively bearish and we will be looking for opportunities to take advantage of the price swings before the NFP report on Friday.
The Cable was also volatile on Friday rallying higher in the morning but always within its previous highs, however it is important to note that the UK currency has established a foothold above the 1.5600 area. The Pound will be on focus this week with the BoE meeting and the unusual press conference that will follow it this time instead of the release of the minutes a couple of weeks later. Before that though the PMI reports should spark some price action and the bias for the Cable is towards the upside with the currency breaking into new highs being the trigger.