Alpesh Patel
InvestingBetter.com
General market theme
Volatility in the money markets remained elevated at the start of the week even though there was little in terms of fresh news to attract investors’ attention. With the Chinese markets closed for the Lunar New Year celebrations an important amount of volume is missing from the markets and that adds to any volatility as price swings are far stronger on thinner volume.
Everyone’s attention is mainly focused on the US Dollar and its outlook that hangs in the balance with Fed’s Chairwoman Yellen being the decisive factor as she gives her testimony ahead of the House Financial Services Committee. If she sounds concerned then any bullish bias after the NFP report will go away while a brave face and words of confidence to the domestic economy will help the Dollar gain some more ground.
Price action highlights
The Euro was quite volatile and unstable during the first 24 hours of trading this week and initially it seemed that the Single currency will continue falling on the back of the surprise in the NFP reading on Friday. However midday the Euro corrected to the upside once more and reached the 1.1200 area highs where we find it this morning. We should remain cautious and even though the bias might be looking bearish we will be more sure after Yellen’s testimony tomorrow.
The Cable on the other hand was rather bearish and the decline that started on Friday extended its losses with the UK currency dropping to the 1.4400 level. Fears about a potential Brexit and the recent bearish Inflation Report from the BoE have turned the outlook of the Cable to the downside and even though we might see a slight correction again the Pound is a sell on rallies higher.
Focus of the day
There is little in terms of important news on the docket for the day ahead and we should mostly focus our attention on the price action itself. The British Visible Trade Balance report will be released in the morning following the German Industrial Production levels that have already printed in a bearish manner earlier. Later in the day the US Wholesale Inventories report is not expected to affect the price action too much today so patience is advised for today.
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