Compared with last week’s action-packed schedule, which included unexpected news of the Chinese Yuan’s move to flexibility, a dramatic UK Budget Release, and a rather dovish U.S Fed Statement, this week has started off on a relatively calm note. Major pairs continue to trade near last week’s closing levels, and with relatively little news expected today, traders could very well see a continuation of low volatility. However, there is always “calm before the storm” and with the U.S Non-Farm Payrolls released on Friday forex investors can most definitely expect choppy waters ahead.
The Dollar was on the defensive this morning, as forex traders sought to reduce their long positions in favor of the Greenback and the Euro climbed as the market’s focus switched from the Euro Zone’s debt crisis to the U.S. recovery.
At the beginning of the last week, the Euro fell against the Dollar, before cutting losses in the wake of weaker-than-expected housing figures and a rather cautious tone from the Federal Reserve. The EUR was at $1.2367 by Friday’s close, down nearly 0.5% from last Monday’s high of $1.2466.
Nonetheless, the EURUSD is making another move towards $1.2450 this morning. The single currency failed in its previous attempts to cross this key resistant level; however, this time around the Euro may have the strength the break the $1.2450 barrier as Dollar preferred sentiments appear to be declining.
The British Pound rose to a 7-week high against the Greenback on Friday after the Bank England was seen as split on when to raise interest rates and the U.K government was applauded for its strict budget cuts. On Friday, the Sterling hit a daily high of $1.5078 before retreating to close the week at $1.5047.
The Pound’s recent momentum demonstrates that investors are stepping up to support the GBP/USD pair; therefore, another potential breakout is plausible if the pair can successfully break above last week high.
Down under in Australia, the Aussie rose against the Dollar, last week, as speculations increased that the weaker than expected U.S recovery will hinder the Fed from raising interest rates. Last week saw the Australian Dollar benefit from the Yuan’s move to flexibility, as Australia exports a great deal of commodities to China. However, the political upheaval in the land down under hampered the Australian Dollar’s rise. Last week, the ruling Labor party elected Julia Gillard to replace the current Prime Minister Kevin Rudd. Rudd’s popularity took a turn for the worse after he was criticized for imposing a 40% tax on mining profits. However, with the new prime minister sworn in and already promising to renegotiate the controversial 40% tax, the Aussie’s focus can return to this week’s fundamental news.
Written by Finexo.com