Forex Investment and Currency Trading

The currency markets are showing little enthusiasm this morning; quiet markets may well characterize trading this week though the USD looks a tad vulnerable to extending the grinding losses seen over the past week or little more; overnight USD gains made on the back of comments from China’ central bank governor suggesting that there would be no quick move away from the USD have faded a little after the head of the Arab Monetary Fund suggested that the US’ huge debt pile and concerns about the USD’s reserve status could weigh on the currency. European news has been a little more positive, with UK house price data suggesting that the stabilization in the housing sector continues (albeit from a very weak base still) while euro zone sentiment data showed a further modest improvement in June (the data tends to correlate strongly with GDP trends and suggests that a bounce in euro zone activity is unfolding after the slide through Q1).

The week ahead is of course dominated by the US payrolls release on Thursday (one day early because of the Independence Day holiday on Friday). The market reaction to the payrolls will be of particular interest. Last month’s 175K upside surprise in the payrolls data saw a 1.6% fall in EUR/USD on the day. This was the first time this year that the payrolls release has seen a “normal” market reaction, rather the impact playing through equity prices and risk appetite. Ahead of the release, the (hugely unreliable) ADP data are out on Wednesday.  Other US highlights are the provisional CB consumer confidence (tomorrow) and ISM manufacturing survey (Wednesday).

EUR/USD’s position on the short term (6-hour) chart looks modestly bullish; the market has sustained the break out from the consolidation range that developed through the earlier part of June and traders look for further gains in the EUR if spot can break through short term resistance at 1.4125. Short term support is seen at 1.3980/00.

USD/JPY retains a heavy bias also from a technical point of view; the USD has eased below important support points on the daily chart over the past week or more and looks poised to test lower towards the upper 93 area at least; the strong support is at around 95 in the short term (there is a large option expiry today at 95.35 supposedly).