Summer trading at its best these days, as markets are ignoring the impressive Friday’s NFP number in the United States and try to squeeze in the other direction. AUDUSD is making new highs and completely retraced the NFP move, while EURUSD is trying to do exactly the same. What is wrong with this picture?
The NFP last Friday was really impressive with the US economy adding jobs for more than seventy consecutive months and with labor participation rate being on the rise as well. As a consequence, the US dollar moved higher across the board, with EURUSD falling to 1.1050 area, while AUDUSD moved briefly below 0.76 as well.
However, it was only a matter of hours until the pairs reversed the trend as Friday after the NFP release AUDUSD reversed its losses and EURUSD regained the 1.11 area as trading algorithms are doing a great job in summer trading. In other words, the moves were faded as market participants seem to interpret them as being fake moves.
I don’t know about that, but I do know fading is expensive as trying to catch a falling knife in trading is similar to blowing an account. Therefore, I would ignore these bounces, even if the AUDUSD looks pretty impressive.
This week it is all about the Core Retail Sales on Friday as market participants are looking for confirmation on the good US data as focus is shifting on the Fed to hike rates.
It is going to be difficult for a rate hike to be delivered considering the US elections will take place at the start of November. However, no one can deny the strong US economy momentum and rate normalization is only a matter of time.
If last week was all about the NFP number, this week technical traders will have the chance to analyze charts and look at levels as it is unlikely that market will move aggressively due to lack of relevant economic data. Under these conditions and considering that summer trading is still very much alive, it is recommended to trade lightly and only add to a position if specific levels are broken.
Despite slow markets now though and fake moves all over the place, look for volatility to come back once August will be over.