The recent trading days have been very profitable for traders due to high volatility amid concern over China and global uncertainty. Given this week’s major risk events, volatility is likely to persist, providing traders new chances for some profitable moves.
While the divergence in monetary policy between the European Central Bank and the Federal Reserve should determine the market’s price action, the focus will be on the U.S. Non-Farm Payrolls report on Friday. The monthly job report could be a key factor for the Fed’s decision to raise rates in September. If there is a solid job growth with payrolls exceeding 200k and average hourly earnings moving up, the Fed could hike rates on their next FOMC meeting despite global turmoil. Nonetheless, investors have reduced the probability of a Fed move next month.
An important indicator before payrolls are due for release will be the ISM Manufacturing index, scheduled for release on Tuesday.
The European Central Bank will announce its monetary policy decision on Thursday. Moreover, ECB president Mario Draghi will present the quarterly economic forecasts at the press conference. Market participants are looking for further easing to be announced before year-end.
It should be an interesting week for traders and regardless of which way the financial markets move, we will try to gain a nice profit in either direction.
The week starts off with important data releases such as Eurozone Consumer Prices at 9:00 GMT.
We see the euro currently trading between 1.13 and 1.12. If the currency pair is able to break significantly above 1.13, chances are that it heads for a test of 1.14. Below 1.12 we favor a bearish stance but note that the support line could still act as a small hurdle for euro bears.
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