General market theme
Price action in the currency markets was limited for yet another day yesterday as investors were rather cautious at the beginning of the week. From the European currencies, the Euro was the most active one but the initial push to the upside was abandoned and the rate corrected lower even though the IFO Survey printed in a better than expected way.
The report showed that the Brexit-related consequences were milder than initially feared and that the Eurozone is doing relatively well, however the Euro failed to benefit from it. Today investors will focus their attention on the US Dollar as the Services PMI reading and the Consumer Confidence levels are scheduled for release and the bias is against the US currency.
Price action highlights
The Euro edged higher and made it to the 1.1275 level but the momentum was just not there and the upswing was quickly reversed and the day ended with the rate trading below the 1.1250 area. Whether the Euro can go higher depends on how the Dollar will react to today’s reports and truth be told the bias is against the US currency so we might see an attempt towards the 1.1300 area which is the first target for the day ahead.
The Cable seems to have settled around the 1.2950 to 1.3000 area and what it now needs is a reason to break in to higher ground. Should the Dollar remain under pressure from today’s report we could see the Pound making an effort to trade above the 1.3000 barrier even though the fresh Brexit-related concerns are casting doubts over the currency’s outlook. From a technical point of view the chances for a break higher are high but we should remain cautious as the fundamentals are mixed.
Focus of the day
Like we mentioned above today the focus will be on the US Dollar as we have 2 Dollar-related reports from the US: the release of the Services PMI levels for the current month and the Consumer Confidence figures. The PMI release is unlikely to cause a lot of reaction as it is a premature reading, however the consumer report will be closely monitored as analysts expect a bearish reading which will put Dollar’s outlook under more doubts.