Major currency pairs remained unstable yesterday lacking any conviction as traders are not willing to commit into any serious positioning ahead of the important events today and tomorrow. With attention turning to the ECB today and Mario Draghi’s press conference after the rate decision and the release of the Non-Farm Payrolls report tomorrow there is a clear lack of follow-through in the price action of the major instruments.
Over the past 24 hours we’ve had a number of second-tier reports from Europe and the US but the price action diverged from what would be considered a normal reaction to these events. We must assume therefore that investors that have returned from their holidays are still uncertain on what are the prevailing trends in the market driving the major FX pairs in directionless trading.
Today however we should be able to get a much clearer picture at least for the Euro as the ECB rate decision and more importantly Draghi’s comments on the press conference that will follow should offer important insight on Euro’s outlook. There are fears that even though the ECB will hold firm on its policy they will appear more bearish on their economic forecasts and possibly hint on an extension of the easing policy that could send the Euro tumbling against its peers.
The Single currency has found it difficult to overcome the 1.1300 resistance over the past couple of sessions and yesterday declined to trade nearly to 1.1200. There is a clear lack of direction ahead of the ECB and NFP events and we should remain cautious until the currency carves a new direction for itself.
At the same time the Cable had another bearish session yesterday after another downwards surprise on the PMI reports this week. After the miss on the Manufacturing report earlier in the week, yesterday the Construction sector’s reading came out lower than expected driving the currency to fresh lows. Now the focus turns on the release of the most important Services’ PMI report that might tick lower as well in line with the rest of the activity sectors. The Cable is trading near the 1.5300 area and another bearish reading could increase the pressures and threaten fresh lows today.
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