While today is relatively quiet on the economic front, the week is set to ramp up with some key events on the calendar. The USD will be the currency to watch with the FOMC meeting and non-farm payrolls being the key events on the calendar. The Fed is expected to taper by a further $10 billion and the market will be now starting to think about the exit strategy, as QE completely winds down. The tone among the Fed members will be interesting as the market looks to establish a median among members’ views as far as the Fed funds rate is concerned.
Focus will then switch to employment numbers with non-farm payrolls data due out. The market is quite bullish heading into the data, looking for more than 200,000 jobs added. Unemployment claims last week dropped to the lowest level since February 2006 and this saw the four-week average drop to around 300,000. This week’s reading will help determine whether momentum will continue into the second half.
We have seen five consecutive months of growth in NFP of over 200,000, including one over 300,000. Should we see further strength this week, the USD might be looking to extend gains across the board.
Major FX pairs have started the week flat and I suspect we’ll see some caution heading into some key events for the greenback.
Cable cracks starting to show
After trading above the 1.7000 mark for a while, GBP/USD seems to be finally losing its grip on the 1.7000 level and has been slowly drifting since. There had been an uptrend support line in place since July last year, which now looks to be broken. The chart has quickly turned bearish as the greenback comes back to life. Support came in at around 1.697 and the pair is trading right on it at the moment. I feel any moves back into the 1.7000 level in the near term are likely to be used as an opportunity to sell.
Data out of the UK is limited this week and we traders are likely to be pinned on the USD side of the equation.