[B]Talking Points
• Japanese Yen: on holiday yen trades quietly on individual flows
• Australian Dollar: ANZ job ads rose for first time in 3 months
• Euro: Sentix ticks lower capping the bounce
• Pound: UK on holiday
• US Dollar: ISM Services on tap[/B]
A very quiet start to the week as both Japan and UK have national holidays, greatly limiting investment flows for the day. Throughout Asia and early Europe, EURUSD staged a mild retrace rally after last Friday’s better than forecast NFPs took the pair below the 1.5500 level in the aftermath of the release.
Today’s bounce in the EURUSD stalled right back at the 1.5500 level as the weaker that expected Sentix investor confidence survey which printed at 3.5 versus forecast of 3.9 put a cap to any upside momentum in the euro. 1.5500 appears to be the level of equilibrium for the time being with euro bulls still hoping for another retest of 1.60 while dollar longs are targeting 1.50 as the key level for the breakdown of the larger uptrend in the pair.
As we noted in our weekly “Having pierced 1.5500 support level this week, after gaining more than 300 points the dollar may find next week a bit slow going. This week the US economic calendar will not command nearly as much attention, with ISM Services and Trade Balance being the only possible market moving data points. The most important event this week will likely come from Europe when traders will focus on any change of tone from ECB chief Jean Claude Trichet at his monthly press conference. If Mr. Trichet makes even s casual suggestion of a shift to a neutral stance, the dollar may gain further, but if he remains hawkish we could see a rally back to 1.5600 as the week comes to a close. Still all things being equal, the EURUSD looks far more likely to hit 1.50 rather than 1.60 in the near future as market participants turn their attention to the slowdown in Europe rather than the problems in the US.”
With parts of Asia and Europe closed, today’s US ISM Non Manufacturing report is likely to be the key driver of trade for the rest of the day. Markets are looking for a slight dip in the reading, but the greenback is unlikely to be badly hurt unless the number prints below 49 or worse. However, if that were to happen the EURUSD could return to the 1.5600 figure as all of the positive sentiment from last week’s better than expected US economic data would quickly disappear.
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[B]To discuss this article please contact Boris Schlossberg, Senior Curency Strategist: [/B][email protected]