Markets Struggle

Worse than expected EU data during the London session has put a temporary halt on the EUR/USD rally. After booking a profit on the recent retracement we are now faced with a rangebound market broadly defined from 1.4650 to solid support at 1.4550. US consumer confidence numbers come out this morning and should have little impact on that range. Indicators are mildly bullish but we will tread lightly with scalping opportunities and tight stops until the next breakout.

How Low Will The USD Go?

Continued weakness in the US Dollar has driven the EUR/USD currency pair to 1.4751 during the Asian session. In his remarks to Congress, Fed chairman Bernanke said the US economy is expected to "slow noticeably." Although he characterized the economy as "resilient" overall concerns about inflation, higher energy costs and the struggling housing market increased speculation for another interest rate cut in December. While our indicators remain positive, we look for an unsettled day to close the week. US import and export prices will be released at 13:30 GMT along with balance of trade numbers.

Vo;atility Assured

While there is some disagreement as to which way the numbers will fall, one thing certain is that there will be more volatility coming back into the market following the release of the US non farm payroll numbers. Generally, job growth is expected to wane slightly for the period. But mixed signals are coming from an increase in manufacturing numbers, the highest since April, and a reported decrease in layoffs. While the consensus is for a modest increase of 88,000 in payroll, some estimates range as high as 130,000. Given the increasing crude oil prices and declining interest rates in the US, it will take a positive surprise to prop up the US dollar. Anything less should continue the bullish outlook for the Euro. We will continue to play the long side of the EUR/USD currency pair.