So far this week there’s no movement on the Forex market. As a matter of fact, not even last Friday, despite the NFP (Non-Farm Payrolls) release, volatility was extremely low. Let’s put it this way: last week the market consolidated, waiting for the NFP. When it finally arrived, there was still no movement.
I am talking about the EURUSD and AUDUSD…even the NZDUSD pair wasn’t impressed by the jobs data. While it beat expectations by a mile, average hourly earnings showed no pressure on future inflation levels. As such, the original higher dollar reaction was quickly reversed. Only for later in the last week’s trading hours, the dollar to gain some traction.
The USDJPY Tries to Squeeze Higher
The above was valid/still is on the EURUSD pair. However, the JPY pairs did travel. A lot.
As the most representative currency pair, the USDJPY pair is on a one-way street higher. From the 109 area until the current 114, the market didn’t make any meaningful pullback. No matter what the economic release was, (ADP, ISM Non-Manufacturing, NFP), the pair simply recovered from every dip.
Because EURUSD consolidates around the 1.14, the EURJPY cross managed to push through the 130 psychological level. Moving forward, expect the cross to keep the level at all costs.
Eyes on Yellen’s Testimony
Chances are ranges will hold for now. On Wednesday, the Fed Chair Yellen is due to testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington D.C. The dollar will move aggressively.
Even though on Thursday Yellen testifies again, the market rarely moves as the speech is similar with the previous one. As such, Wednesday’s remarks and especially the questions and answers session will be top sensitive for dollar traders.
CPI on Friday
However, Yellen is unlikely to change her last bias. She’s hawkish on the economy and will reiterate that. But, inflation lags.
On Friday, the CPI – Consumer Price Index (inflation) will hit the wires. Traders will focus on the Core CPI number, as it is the favorite measured move for the Fed. What is interesting in the United States is the fact that the PCE (Personal Consumption Expenditure) is falling, when the Fed counts on its rise before hiking some more.
As such, this week may seal the dollar’s fate ahead of August. If that’s going to be the case, the EURUSD needs to trade much higher than the current levels. I wouldn’t be surprised to see 1.16 and above by the time summer holiday ends.