Calm before the storm

The FX markets are trading within recent ranges following comments late on Friday from Fed Chair Janet Yellen. The speech failed to reveal anything fresh as the tone stuck to the FOMC statement suggesting that rates are likely to rise in 2015, but the pace of the increase will be gradual. The market will now be turning its focus to the US jobs report that is released on Friday. Only one thing can be guaranteed in a holiday market; and that is volatility.

The People’s Bank of China Governor Zhou gave a boost to the risk sentiment as he suggested the Chinese Central bank is well equipped to deal with the threat of deflation and a declining growth rate, with tools available being interest rates and the risk positive ‘quantitative measures’.

The AUD and NZD led the stronger dollar move in the Asian session as the weaker commodity markets have led to media speculation that monetary policy will need to loosened as capex data underwhelms. The disappointing non-mining component in Australia has led for fresh calls for the RBA to ease policy further when they meet next week.

The latest CFTC data reveals yet another increase in dollar long positioning as Euro shorts increased by $4.5 billion to $30.2 billion, which is the highest level since June 2006.

US PCE data which is the FOMC preferred gauge for inflation will be released at 1.30pm today.

EUR/USD
Supports 1.0780-1.0615-1.0580 | Resistance 1.1050-1.1110-1.1250

USD/JPY
Supports 118.30-117.80-116.70 | Resistance 120.00-121.55-122.45

GBP/USD
Supports 1.4810-1.4635-1.4550 | Resistance 1.4990-1.5030-1.5170