The Euro is unchanged since the start of the trading week, but other currencies such as the GBP and AUD have traveled with less than fantastic PMI figures being announced. The PMI manufacturing figures actually came on the soft side in the United Kingdom and the GBPUSD pair sold aggressively, but today’s PMI services release was way better than expected.
This is more important for the GBP as the UK is a service-based economy. However, despite the strong PMI services results, the GBPUSD pair is refusing to rally and this tells us a lot about the strength of the US dollar at this time.
From our point of view, the main events of the week are still ahead of us as Thursday will see the ECB (European Central Bank) press conference and Friday will be the all-important NFP (Non-Farm Payroll) announcements in the United States. The US recovery seems strong as the unemployment rate drops faster than the Federal Reserve expectations and a strong print this Friday should only confirm the trend.
Judging by how markets are positioning for the two events, it seems the EURUSD is waiting for Draghi’s speech before making a move. While there are no expectations of a rate cut or more easing from the ECB, the press conference may offer some clues regarding the ECB’s intentions for the rest of the year. Until the press conference is done, we advise traders to look to trade EURUSD in ranges as no one seems willing to take a risk there.
As for the US dollar, markets are already positioning for a strong NFP, as both the USDJPY and the USDCAD rallied so far into the week. Out of the two, the USDJPY is the one currency pair that is mostly influenced by the jobs data in the United States and it is usual for the pair to trade into the highs until the actual figures are released.
All in all, traders should expect a volatile end of the trading week as these two events are some of the most important events to highlight in the economic calendar. Add to that the recent “ceasefire” between Ukraine and Russia, and we have all the ingredients for even more volatility to come.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
