Volatility has been limited at the beginning of the week as traders are gradually returning to their desks after their holidays. Yesterday the price action on the major money markets was rather smooth as the UK markets were closed for a holiday and there was little appetite for risk among investors.
However we do expect volatility to pick up pace as we move towards Friday as the event of the week is the release of the US Non-Farm Payrolls that could be a decisive point on whether the Fed will pull the trigger and raise interest rates this month. We expect more price action in the Dollar crosses with the Euro and the Cable being among the most important ones as traders will look to position themselves ahead of the event.
Today however the focus will be on Europe during the morning trading session with the release of the German unemployment report and the UK Manufacturing PMI. Later in the day though we will also find out how the Manufacturing sector fairs in the US as well with the release of the ISM report so there will be plenty of reasons for traders to dip their toes in the market.
Taking a look at the technical outlook of the major currency pairs, the Euro had been trading quietly between 1.1200 and 1.1300 over the past couple of trading sessions and it seems that it is looking to build some momentum towards higher levels. The 1.1300 barrier is the first resistance limiting the price action to the upside and if the Euro manages to overcome it then we will be looking towards the 1.1400 area as the next target.
The Cable has also been trading sideways in recent sessions having found some support around the 1.5400 area. The recent decline in the UK pair seems to have lost all momentum and if the Pound receives good news from the Manufacturing report today we could see an attempt to move higher with the 1.5500 area coming into focus.
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