And here we are a few hours before the release of the Non-Farm Payrolls report from the US economy which we know is the most market-moving event in the currencies’ universe and will most probably dictate the price action for the following weeks. Speaking of price action though, during the last 24 hours we expected to see limited volatility in the major instruments we monitor since the calendar was light and nobody would want to take any big decisions before the US jobs report.
It seems however that we were wrong as volatility in the major instruments remained elevated and we saw interesting and to a point weird price action. The theme of the market was a weakness for the US Dollar during the first part of the trading day, a weakness that was partially recovered until the end of the US session. Both the Euro and the Cable printed fresh highs from which they came off before the end of the day and the question now becomes whether we will see further gains for the European currencies or whether is time for the Dollar to take back its lost ground.
There are plenty of reasons and indications pointing towards either a strong encouraging NFP report or a weaker printing for the report this month. The released reports we usually use to make a prediction on what we expect to happen have come out mixed this month so there’s room for a surprise towards either side and this makes this particular event very interesting. The Dollar has given up significant ground over the past couple of weeks and the NFPs will either accelerate these losses or help reversing the downtrend.
From a technical standpoint, the Euro is trading just above the 1.1200 area this morning having come off its 1.1300 highs of yesterday. A strong NFP report would send the Euro lower today and in combination with the not so encouraging news from Greece’s debt negotiations with their creditors we could see the Single currency taking a hit. A clear break of the 1.1200 support floor followed by momentum should send the Euro towards the 1.1100 and 1.1000 levels.
The Cable burst to 1.5440 yesterday for really no good reason as the release of the BoE Rate Decision was pretty much known and we had no other news to excite investors. The currency came off these highs later in the day to find itself trading around the 1.5350 area of support this morning and the currency’s outlook obviously hinges on the NFP report later in the day. A strong report would mean that the Cable would retreat below the 1.5300 area, possibly making its way to the 1.5200 level.