Since the speech of the Federal Reserve Chairman, Ben Bernanke , forex market appear to be largely influenced by the future development of monetary policy. The “bulls” are in the “spotlight” on the USD. Indeed, last Friday, Jeremy Stein, a member of the FOMC, suggested that the central bank could decide to slow its support measures in September.
"The Monetary Policy Committee (FOMC) should "be clear that in making a decision in, say, September, it will give primary weight to the largest stock of news that has accumulated since the inception of the program and will not be unduly influenced by whatever data releases arrive in the few weeks before the meeting."he declared.
The anticipation of a slowdown in the massive program of asset purchases has the effect of reviving interest in the greenback. The next meetings of the committee are scheduled for July 30 and 31 and September 17 and 18.
But other comments from members of the Federal Reserve suggested that it was too early for a change in policy. Since the beginning of the year, the Fed invests $ 45 billion per month in bills and $ 40 billion in mortgage-backed securities (MBS) to stimulate economic recovery, a measure that tends to dilute the value of the USD.
“Since the outbreak of the financial crisis, there has been speculation about what would be the country that would standardize its policy first,” wrote a broker from Brown Brothers Harriman in a note. "The United States could be the first to do”, he added.
The improvement in the labor market is one of the elements that scans the Fed to decide his actions. Traders will, in this regard, particularly careful the official monthly publication of the ADPreport on non-farm employment and the unemployment rate in the United States, next friday.
But first, market will interpret the mixed PMI from China. The official figure is above the consensus at 50.1, while the HSBC index meanwhile, with less than 48.2. This is even more concern for about three weeks, a shortage of liquidity in the China interbank market has caused a surge in short-term rates in the market, jeopardizing the ability of Chinese banks to finance and loans.
On the other hand, it will follow Monday, the feeling of purchasing managers in the industry, for the United States, but also for European countries (which the trend is up since sept2012 for the Euro Area and Germany, since mid-January for France).
Close attention to a potential decline in interest rates, on Tuesday, in Australia whose economy is heavily dependent on the Chinese economy. Aussie could decrease sharply after the mixed figures of purchasing managers in China. A big support at 0.9112, the lowest in the last 34 months, with a potential test of 90 cents.
And especially Wednesday will be a big day. Will be published the first figures ADP report. Given the Independence Day on Thursday, the number of “jobless claims” will be announced on Wednesday, with the publication of the non-manufacturing ISM (expected to rise).
To follow, also the speeches of members of the FOMC, Dudley (Tuesday) and Lew (Wednesday). Will they confirm a slowdown in the Fed’s actions in September, as suggested by another member of the FOMC, Jeremy Stein, last week?
Finally, the ECB president, Mario Draghi, will hold his press conference, on Thursday, during which no major information should emerge. Indeed, the economic conditions in the euro area do not allow to review, like the Fed, the terms of its monetary policy. This is even more true that last week at a meeting in Paris before the French Parliament, the President of the ECB reiterated its accommodative stance to support growth and employment.
Given these factors, high volatility is expected Wednesday and Friday.
The Euro should not be supported by the ECB. Thus, the support of 1.30, repeatedly tested could break with good figures of American jobs. But before a rebound towards 1.3120 is still possible, with a bullish retracement in a downtrend. In case of epidermal reaction against poor US employment figures, a return above 1.32 would strengthen the bullish retracement. But beware, the underlying trend remains bearish for the euro.