Lack of stimulus creates low volatility environment at the start of the week

On Friday the price action in the major instruments we monitor in our daily report had little to show for as there were no fresh developments to spur any interesting swings. We made word in our report for the possibility that the Dollar returns in charge of the major currency pairs but for that to take place a few things are required.

Earlier in the year the market was long Dollars in light of Fed’s intention to raise their rates during this year but the weak performance of the US market in the past 2 months or so has convinced investors that is no longer the most likely scenario. So for the tides to turn the other way again and traders to start getting behind the Dollar once more a fresh round of bullish data out of the US is needed.

During the week ahead of us we will not have any major economic reports from across the Atlantic so any changes in the Dollar’s outlook will probably have to wait for the next week. However that doesn’t mean that we will not get to see any interesting price action as the focus will be on Europe and the UK. Eurozone’s PMI reports, UK Retail Sales and of course ECB’s meeting on Thursday guarantee friction in the majors so we should be in for an exciting week.

Taking a look at the technical outlook of the currencies, the Euro trade below 1.1400 at the end of last week but on Friday the Single currency didn’t pick up any momentum to continue much lower. The European pair is trading around the 1.1370 area this morning and the previous bullish outlook might be turning lower finally.

The currency has received support from ECB officials recently but we can no longer overlook the weaknesses in the Eurozone and the upcoming PMI reports might bring them back in focus. We expect limited price action today but for the short-term as long as the Euro remains below the 1.1400 area we should remain bearish.

The Cable was also muted during the final 24 hours of trading last week as the pair seems to have found some balance between the 1.5400 and 1.5500 levels. Unlike the Euro, the Pound has seen the recent signs of deceleration in the economy reflected on its price and although it has taken advantage of Dollar’s weakness since the start of the month we could see further upside on the UK currency. The UK Retail Sales is the focus of the week and with consumer spending expected to have improved we could see an upwards break of the 1.5500 barrier soon.