A Cautious Approach Taken

Monday proved to be a day of cautious range trading. Although the USD fell to new lows against the EUR and GBP during the day’s session it also fought back to the ground it had started from and in effect worked like a pendulum. Gold has maintained its high territory but has come off of its absolute record. Crude Oil remains stubborn and yesterday’s international news didn’t result in any dynamic changes. The AUD does continue to trade in its upper reaches, but has come off of its top. The JPY has inched to a slightly better value against the USD. Monday’s data was very light because many European nations participated in the Labor Day holiday. The U.S. did release its ISM Manufacturing Index and it came in with a result of 60.4 compared to the expectation of 59.9. Wall Street turned in what also became a rather quiet day as all three major indexes finished barely negative.

Today the U.S. will release Factory Orders and a gain of 1.9% is forecast. Last month’s number had a surprise drop, so it will be of interest to see what the outcome is. Tomorrow the States begins its jobless data parade. The ADP is up first, on Thursday the weekly Unemployment Claims follow, and then on Friday the all important government Non Farm Employment Change numbers come. The jobless story in the U.S. continues to shadow the Federal Reserve. Besides the inflation worries that are coming about because of higher energy costs the prospects of a worse than usual employment problem in the U.S. is having an adverse effect on the psyche of American consumers. The USD has found itself under immense pressure the past few weeks and with the combination of jobless numbers, and monetary policy meetings about to take place in Europe and the U.K. this week, traders are bound to see some opportunities to take advantage of.

Data from Europe will be quiet today except for the broad PPI figures which carry an estimate of 0.7% compared to the result of 0.8% last month. Tomorrow the Final Services PMI report will come from Europe along with Retail Sales figures. However the core of sentiment this week will focus on the ECB meeting that will take place on Thursday and will see Claude Trichet, the President of the ECB, take center stage at the monthly press conference. Once again Trichet is sure to be asked about the Sovereign Debt concerns that shadow Greece, but perhaps the most important short term effect will come from anything Trichet says about inflation and what he believes the ECB will do with its interest rate because of it. In the past week Trichet has actually talked about the need for a stronger USD and his belief that the ECB is done for the moment in regards to raising its own interest rate.
However the fact that the ECB continues to have a higher rate of return for investors has no doubt had an impetus on the EUR and its current value.

The Sterling finds itself within the higher realms of its value. The Manufacturing PMI reading will come from the U.K. today and its expected mark is 57.0, which would be just slightly below the previous outcome. Tomorrow the Nationwide HPI is on the schedule supposedly. The U.K. continues to see a strong GBP but it also continues to find itself beset by a growth rate which is struggling to achieve any significant signs of life. The Bank of England meets on Thursday and no major surprises are expected. The GBP remains an interesting trade as it has proven to be the recipient of a strong trend.

The AUD is off of its highs. However its interest rate and the price of commodities still make it an interesting opportunity in many investor eyes. The high value of the AUD has put Australian export companies under some stress and been sighted as a concern. But the Australian government for the time being appears to be taking a ‘hands off” approach to the AUD and this will continue to keep it an interesting currency to test.

Written by bforex.com