We welcome you to a new trading week. While liquidity returns to the markets, providing a more volatile trading environment, there will be no top-tier economic reports until late in the week. Thus, with no market-moving data scheduled for release until Friday, trading could be quieter and prices more range-bound in the first half of the week.
Those who did a trading break last Friday and did not reinvest weekly profits (as recommended), have not missed out on anything. On the contrary, trading during U.S. payrolls release has once again proved to be more loss-making rather than profitable as high volatile swings bear a high risk for both pending and open orders. The U.S. dollar received a small boost as wage growth rose by 0.4 percent, giving reason for optimism that growth in the U.S. economy is poised to accelerate. While the focus was on wages, monthly payrolls fell short of analysts’ expectations but this decline is not enough to change the Federal Reserve’s hawkish monetary policy stance.
The euro tumbled toward the lower bound of 1.05 and we shall now turn our focus to the 1.0480-level. If the euro falls below that support level we expect further losses towards 1.04 and 1.0370. However, considering that the euro recently traded sideways, we anticipate the price action to be limited to a price range between 1.0640 and 1.0340.
The pound’s price action is dominated by political risk and fears of a so-called hard Brexit.The pound sterling traded lower against the greenback after comments by Prime Minister Theresa May on the U.K.’s European Union negotiations. May signaled regaining control of immigration and lawmaking are her Brexit priorities even if that means quitting Europe’s single market. Bearish momentum accelerated this morning, pushing the pound below its crucial support at 1.22. If the currency pair is unable to stabilize above 1.22, we expect further losses towards 1.2120 and 1.21. Looking at the technical picture we see that the descending trend line of the recent downward channel is currently at 1.2120, providing an attractive opportunity to buy sterling towards 1.22. A short-term resistance is however seen at 1.2270.
Apart from a busy docket of scheduled speeches from several central bank officials, the only interesting piece of economic data will be U.S. Retail Sales and Consumer Confidence on Friday.
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