Choppy price action at the beginning of the week in most major instruments

Volatility in the major currency instruments and money markets has already picked up this week as yesterday we noticed interesting price action in most of the instruments we monitor. However next to volatility we need to add lack of direction as even though we some attractive price action it seems that traders are not yet clear on what they want to do and drove the major instruments in a sideways trading action.

As we mentioned in our analysis yesterday this is an event-heavy week and there will be plenty of opportunities to take action and trade on the back of news and fresh reports. Yesterday the focus was on several reports across the globe and as such the major currency pairs had a bumpy and unstable ride. We expect similar price action during the following days leading up to the important US jobs report on Friday that could dictate the sentiment in the market for the rest of the month.

Taking a look at the technical outlook of the major currencies, the Euro had a volatile session yesterday beginning with a pullback higher early in the day on the back of the encouraging German inflation levels. Later though the Single currency came under pressure when the Manufacturing ISM report from the US offered renewed support to the Dollar and drove the Euro down to 1.0900 again.

For the time being the currency’s outlook appears mixed, certainly the correction rally of last week seems to have died out but for fresh losses to occur the Euro needs to break below the 1.0900 area. Such a scenario would drive the Euro to the 1.0840 lows of last week and possible lower than that. This morning the Euro-zone inflation levels are expected to print higher that last month and that could allow the currency to remain afloat while if the report misses its mark then we should see renewed pressures to the downside.

The Cable has a remarkable session yesterday, not so much in terms of volatility or price action but the fact that the UK currency remained afloat above the 1.5200 barrier even though the Manufacturing PMI report missed its mark and the ISM levels from US came in stronger is impressive.

This type of price action could suggest a reversal towards higher levels down the road and such a development could send the Cable above the 1.5300 barrier once again. Over the next 24 hours the release of the Mortgage Approvals and the Construction PMI might not be enough to trigger this reversal but could hint us on what to expect from the Cable this week.