The euro is likely to continue trading sensitively to any comments coming out of Europe regarding a second bailout for Greece, whilst the US dollar in the immediate term is likely to be closely tracking the release of US economic data for the remainder of the week. Keep an eye out for today’s US ADP employment change report, which will give clues as to which way the jobs wind is blowing ahead of Friday’s non-farm payrolls.
Range: 1.6444 – 1.6480
Sterling continues to hold into the range highs after taking the strain from the month end fixes in euro/gbp that tested a bullish market into late Europe yesterday. Today we get the release of the manufacturing PMI at 9.30am with the market looking for a very strong number of 54.0 this for me though this is not a key release as the UK economy is very much a service driven economy so await the Services PMI later in the week for confirmation of today’s data if you trade fundamentals. I’m sceptical adding GBP longs at these levels although could one argue that we have now broken out of the topside range?
The volatility continues in this pair as the market continues to trade off the next headline story on European debt crisis namely Greece although I’m starting to have faith that we will challenge the 1.4500 resistance as its seems negative comment are now only having 35/40 point moves as players continue to buy the dips. I like to buy the dips today on official comments ( negative ) and wait to see how the US economic releases pan out this afternoon with the release of the ADP report, ISM, construction spending and mortgage applications. Could another bout of weak US data push 10 year yields through 3%?
This market continues to be dominated by will they or wont they in regards to the upcoming RBA meeting. With a confirmed stronger Chinese PMI and an Australian GDP number that wasn’t as bad as some had predicted it seems a rate hike in coming weeks seems to be getting priced in again. Like the GBP market is you like to trade fundamentals then buy dips into the next economic release and keep a close eye on developments on the US yields as the carry trade could be very much the focus for this pair.