Another week is starting with the dollar once again strong on Monday, mainly due to the fact that Chinese officials have announced yesterday that China is not thinking alternative currencies for now and they will stick to the dollar despite all the rumors and speculations of market participants that the country is looking for a way out. This statement is what keeps the dollar bid for now, however with a busy week in front of us and nonfarm payrolls later in the week, the risk of loses is always a threat which could materialize if economic numbers out of US are better and risk appetite returns once again.
The EUR/USD has found a temporary top at 1.41 and for now the pair seems to be trading within ranges of 1.40 to 1.41. As long as 1.3960 ahead of 1.3930 keeps, there is a further upside move pending towards 1.4160. The euro bulls are waiting for economic data out of Euro zone later in the week and the risk of better non farm payrolls is always an indication of further dollar weakness as fundamentals seem to work backwards in the latest months due to risk aversion and risk appetite.
The economic calendar is almost empty today with just a few releases out of UK and Euro zone which came out mixed and not provided a lot of volatility as traders are positioning themselves for a busier week. The coming days, together with ADP report of Wednesday which show us how many jobs got lost according to ADP, will provide some action and traders will start speculating on the real number this Friday which according to the forecasts may be better than expected. For us to say that recovery is solid and employment sector is improving, we need to see good months on payroll data for more than 6 months. However, even if numbers are better, the unemployment rate is what keeps us in the sidelines for now, as it is rising almost every month. The task of Obama and his boys is challenging, as they have to not only struggle with maintain an economic stability but worry about a potential rising inflation due to the massive debt that the country is facing and more money being printed. The dollar will find difficulty to maintain its gains as investors are losing faith in the currency especially due to the recent rise in commodities.
The other important event of the week which traders are waiting for is ECB€™s monetary policy decision and Trichet€™s speech afterwards. The forecasts want the rates unchanged; however everyone is waiting for the wise words of Trichet regarding the future of the interest rates. The fact that latest data out EU have shown improvement is making market participants speculating that the bank will keep rates at 1% for now, however it will be interesting to hear how they feel about inflation expectations and the single currency.
Stocks are trading mixed since early Asian session, with Europe up for now and it will be interesting to see how the DOW JONES will behave after the open and if this week will be another positive week€¦