Market consolidation and gathering momentum after Asian session rally |
The awaited week has finally started and the FOMC decision is creeping closer by the day. The market was supported further on the back of the dollar and the risk appetite was powered by manufacturing data which eased the woes over the outlook for the recovery.
We started the week with an early push from China which reported the acceleration in manufacturing activity by the most in six months. UK also followed suit with upbeat manufacturing figures for October where the index rose to 54.9 from 53.4 opposing the expected deceleration.
The market is focused on the prospects for the recovery and the momentum seen in economies, especially as fears eased slightly with the 2.0% expansion reported in the third quarter from the US. And now with the expected QE2 to be unveiled this week the support is further seen.
For now, the dollar as tracked by the dollar index is back to trade flat below early highs recorded at 77.21 currently hovering around 76.99 above early lows at 76.76.
Regarding to the euro, the common European currency is also flat versus the dollar as traders remain vigilant ahead of the FOMC and the ECB meeting, where investors fear that Trichet will weaken the euro’s rally with a more lenient stance for prospects of further monetary easing shall the economy need it.
The pair is currently hovering around opening levels at 1.3964 after recording the low of 1.3893 and the high of 1.4010. The pair is still likely to continue the bullishness throughout the day and this week especially as the dollar still seen on the receiving end.
For sterling, as aforesaid, the royal currency continues to be boosted by better than expected data which is supporting the unwinding of expectation for APF expansion to be administered this week. The economy remains under downside pressure especially at the start of the coming year, yet still not as poorly shaped as expected. Sterling rallied on the back of the manufacturing data and currently trading above opening levels at 1.6058 after recording the low of 1.5989 and the high of 1.6088.
Meanwhile, regarding the Japanese yen, we see possible intervention pattern on the chart today with the opening spike for the pair to the upside setting the high of 81.58. The expectations are not confirmed with no comments from the Japanese end, and especially that traders saw the move as a rush in risk demand following China’s data. Nonetheless, to us we will remain vigilant over prospects for more moves for Japan as seemingly the G20 finance ministers pledge to avoid currency devaluation has run its course and Japan will likely move to protect its faltering recovery!
The pair so far is trading around 81.40 areas recording so far a high of 81.58 and a low of 80.24. The market is still anticipating the US income report which is needed to secure the easing woes over the recovery as the third quarter expansion is seen to be aided by recovering consumer spending and that is a strong support for easing jitters.
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