Last week ended on a good note for USD bulls. Economic data on Friday was quite good to strengthen the USD. NFP figures came below expectation but unemployment figures came at 5.1% which is stronger than expected (5.3%). This indicates US economy is now at full employment and FED might be closer to raising rates. GBP was really weak and Euro was mixed.
This week might be a bit slow in terms of volatility; US market is closed today because of Labour Day holiday. This means there will be little or no activity during the US session. The Asian and European traders they major movers of market today. However, the strength of USD is expected to continue from Friday because investors and trader are likely to continue to hold USD in anticipation for a rate hike may be as soon as September, no one knows but trader might take the risk of holding USD into the upcoming FOMC which comes up next week. Sterling has been relatively weak for 7-stright session; this might be due to weaker than expected economic data from the UK especially the PMI. This draw concerns for growth in the UK. Japanese yen has been quite strong as well because it is a risk off currency which trader and investors are holding because of the economic uncertainty in the Chinese economy. Things seems to be a bit calm at the moment, we might see some sell off on Japanese yen across the board. Aussie has been very weak as well, but it seems we have seen the bottom and a reversal is due on AUSUSD.
Some economic data and news are likely to shape this week: the first economic data is from china, the Chinese CPI comes out on Wednesday, the previous data come below expectation and the market will be looking for 2% inflation figure. This will move Chinese correlated assets and currencies: AUD, JPY and commodities. Bank of England rate decision is also expected on Thursday, the market will be waiting to see if there will be a change in interest rate figures or not, but we do not expect to see any change. The last data coming out is from US: it’s the PPI inflation figure.
Technically, GBPUSD closed above a very good support at 1.5168; we might see a rally from this level to test the 1.5257 resistance second resistance at 1.5368 levels. AUDUSD also closed on a good level that could see a rally to test resistance at 0.7039.