Full Volume In Force

Full volume will return to the broad markets today a day after the U.S. and the U.K. both had holidays. The USD continued a slide on Monday against the EUR and GBP. But trading was thin at best and investors will have the opportunity to really prove their sentiment today. Friday also saw light trading as American investors snuck away for a long weekend, meaning today – Tuesday – will see the first real test of outlook since Thursday. The States has turned in poor economic data recently and this week it will certainly be put through another series of examinations. Today the Chicago PMI will be released. Tomorrow the ISM Manufacturing Index comes too. The manufacturing numbers have proven quite negative recently and today’s marks will provide good insight for investors. The jobless numbers will be published on Friday and needless to say the unemployment statistics have remained a thorn in the side of government policy since 2008.

Regarding the story from the States, investors will be most interested in seeing how the weaker than anticipated GDP numbers from last week, and the possibility that the unemployment situation is not improving will cause the Federal Reserve to act. The Fed has taken a weak dollar position for some time, even though they have never said that aloud. But the proof has been in the pudding via the Fed’s quantitative easing policy. This QE policy is set to end in late June and how the Fed states its policy next month will be critical for the USD. The one major counter balance for the USD however still abounds and that is the murky picture that the European Union is presenting regarding the Sovereign Debt situation. Thus the USD will face a test not necessarily of risk appetite versus risk adverse, but simply a ‘beauty contest’ in which the ‘best dressed’ gains the most value when compared to the EUR.

Wall Street has in essence struggled the entire month of May and this last trading day of the month may underscore just how complex market forces are currently. Wall Street turned in three positive days of trading to end last week, but the gains were so lackluster that it actually finished the overall week negative. Commodity prices have continued to also mirror the mixed results in the broad markets. Gold continues to power ahead and maintain a strong range. As of the writing this morning the precious metal is about 1536.00 USD. However other physical resources have faced pressure in the past few weeks and this has developed as economic outlooks are being debated.

The AUD has done remarkably well. It is trading within the higher reaches of its range. The Australian economy is showing signs of strain because of setbacks from natural disaster s recently and the effect of an AUD which is quite strong. However the Australian economy, even though it is showing signs of strain, continues to be a model citizen in many respects. Commodity markets as they have risen the past half year have played a large part in the strength of the AUD. Coupled with the fact that the AUD still enjoys a good interest rate for investors it has proven a stellar performer. The question is what would happen if commodities decline on outlook globally and if the Australian economy does not grow as much as anticipated.

The EUR has done well in recent trading. But it will be put to a real test these next few days as the markets return to full volume. The GBP has also followed suit and gained against the USD. Huge questions continue to mount regarding the debt situation in Europe. Officials continue to say that Greece will not restructure its obligations, while many analysts continue to say the opposite. Germany will publish its Retail Sales today, but the focus will continue to be Sovereign Debt. The U.K. will be quiet with data. Traders will certainly have the ability to test the ranges of both the EUR and GBP today.

The JPY lost ground to the USD in trading last night and early this morning. The JPY continues to be under a well practiced range and presents opportunities for traders who have a strong stomach and patience.

Written by bforex.com