Monday, July 2, 2012

Forex Trading Week Ahead: Eyes on the ECB

If you thought last week’s was exciting, things are just getting started.  After last week’s EU Economic Summit sent the Euro and global equities flying higher this week will offer three main events; Monetary Policy Meetings from the Bank of England and ECB on Thursday, which will be followed by Friday’s US Non Farm Payrolls report.  Sprinkle those three reports with the RBA’s MPC Meeting on Tuesday, a Spanish Debt Auction on Thursday, and the SNB’s FCR figures on Friday and we have a lot to talk about.


Between Thursday’s lows and Friday’s highs, the EURUSD managed to gain 300 pips (from 1.24 to 1.27).  So far to start the week, the pair continues to see demand as the 1.2600 figure was well supported this morning.  The ability of the EURUSD to hold most of its gains contrasts to previous moves in the Euro where it had faded quickly following positive EU news.  The current strength seems to be a combination of sellers that are backing off until Thursday’s ECB Meeting along with momentum buyers jumping into the pair.  As such, Forex traders should keep their eyes on 1.2700, as a break above this level could trigger further momentum.


We mentioned last week that although the GBPUSD was seeing strength on Friday due to the across the board risk rally, we were worried that it had sold off sharply to a week low the previous day.  However, the GBPUSD showed itself to be resilient as after trading to an early morning high of 1.5675 on Friday, and subsequently plunging to 1.5573, the pair quickly snapped back to 1.5700.  After showing quick spikes towards both the up and downside, the GBPUSD looks like a potential breakout candidate as traders decide which direction the pair should be taking.  As such, Forex traders should watch the pair’s 1.5710 resistance and 1.5625 support as trading above or below these levels could trigger follow through momentum.


With all the focus on the Euro, you may have missed the AUDUSD.  The Aussie was an outperformer last week and continues to show momentum today as the AUDUSD is trading to its highest level since May 7th. Overall, since hitting a low of 0.9565 on June 1st, the pair has risen 7.4% to a high of 1.0275.  Helping the pair move higher were comments from the Reserve Bank of Australia last month which were less dovish than expected.  As such, after such a move higher, the Aussie will be vulnerable to selling pressure

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