General market theme
Limited price action in the majors for yet another day and the lack of any fresh news that could move the market is evident especially as investors are keeping a cautious stance over the outlook of the Dollar and the rest of the key currencies. Several Fed speakers expressed a balanced view about the economy yesterday and even though they acknowledged recent improvements in some areas they are keeping their expectations low.
This kind of approach doesn’t allow any serious repositioning in investors’ portfolios and the focus will turn to the US labour market data next week in order to assess whether the Fed has a case for a rate hike until the end of the year. At the same time the Deutsche Bank issue in Germany remains a risk factor and rumors about further easing in the UK are keeping the European currencies in check.
Price action highlights
The Euro was rather choppy yesterday in its trading action and remained generally unchanged trading on either side of the 1.1200 level on the back of no momentum towards any direction. While the Dollar’s outlook remains in doubt and Germany has to find a solution to the developing crisis with its largest bank the Single currency will struggle for direction and momentum so investors are sitting on the sidelines waiting for something concrete before entering the market. We believe that a clear breakout from this sideways pattern is needed before taking the next step.
The Cable hike relatively higher yesterday making its way towards the 1.3050 area but the lack of momentum is obvious and as fresh concerns about the consequences of invoking Article 50 are surfacing again we believe the uptrend might have a hard time going further. The lack of Dollar demand is fueling this move higher but we should be very careful about joining it as it could quickly collapse and push towards its recent lows.
Focus of the day
The German labour market data and the inflation levels from Eurozone’s strongest economy will be in focus during the morning session but we fail to see how it would affect price action in a material way. Later in the day the release of the Initial Jobless Claims will do little to change investors’ bias over the Dollar hence we’re in for another choppy trading day where caution is advised.