Don't forget that you can now follow's research team on Twitter:

The US payrolls data and central bank action have weighed on global growth expectations, which have led to a sharp decline in risk sentiment as we reach the end of the week in Europe. EURUSD is back at fresh 2-year lows and touched 1.2266 earlier, while AUDUSD is back below 1.02 and USDJPY has backed away from 80.00.

The chief driver of the sell off today was the US payrolls data. Here is how we see it. 80K is a lacklustre number. It's not bad enough to warrant more Fed action (at least not yet, anyway) and it's not good enough to spark hope of a summer recovery. The Fed doesn't seem that keen on QE anyway, and the bar is fairly high to get them to do more as we know the Committee is split on whether to add more stimuli to the economy. The Fed may have revised its growth forecasts lower at its meeting in June, but it's not willing to step in and offer some help to boost growth for the rest of the year.

This is bad news for stocks and commodities along with risky FX. The markets are now in an adjustment phase where they fall to a level that is better suited to an environment of lots of debt, not much growth and not much official support. Even those banks that are actively loosening monetary policy like the ECB, aren't giving the markets what they want. For example, the ECB may have cut the deposit rate to 0% (the rate it pays banks who leave money with it) but that hasn't done anything to halt the rise in Spanish bond yields, which closed the week perilously close to 7% - sovereign bailout territory. More effective perhaps, could have been re-starting its SMP programme.

Our week ahead is available here with a more in-depth look at what to expect next week:

Obviously markets don't tend to fall in a straight line, so Monday could attract some bargain hunters and EURUSD. But for now at least, the sentiment in the markets look weak and there may be further dollar strength to come.

Here are a couple of charts I am looking at as the week draws to a close:

EURUSD: weekly chart

Now that we are below the June low at 1.2280, surely a move towards 1.20 and maybe even 1.18 is on the cards? It certainly looks like it from a fundamental perspective; however, the decline may not be even as short positions are already stretched. Thus, we think any pullback to 1.2320 then to 1.24 will be used to sell into next week.


EURAUD: daily

With signs the carry trade is back on, a weekly close below 1.2050 is constructive for further weakness in this pair. Although there may be some profit taking on Monday, we would look to sell on any move back to 1.2100 - the 55-hour moving average. And target 1.20 then 1.19.



Best Regards,

Kathleen Brooks| Research Director UK EMEA |

d: +44.(0).20.7429.7924 | f: +44.(0).20.7929.2010 | M: +44 (0) 7919.411.957 | e:| w:

23 College Hill | 3rd Floor | London EC4R 2RT

Now you can follow us on Twitter:

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that is not rendering investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. is regulated by the Commodity Futures Trading Commission (CFTC) in the US, by the Financial Services Authority (FSA) in the UK, the Australian Securities and Investment Commission (ASIC) in Australia, and the Financial Services Agency (FSA) in Japan.