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Forex: Waiting game

Yesterday FX markets were taking a breather after the relative drama of month end. Most majors clung close to opening levels for most of the session. The main exception was sterling, which continued to push higher, helped by stronger than expected manufacturing PMI data. Cable has now climbed higher for four consecutive sessions and RSI indicators are strongest since early May, suggesting greater risk of some corrective activity in the near-term.

Today is likely to be a day of holding back ahead of tomorrow’s key events, principally the US employment report (a day earlier ahead of Independence Day) together with the ECB meeting. The latter is going to be more about any change in tone at the press conference, especially with respect to the single currency.  Against the dollar it has reversed pretty much all of the depreciation seen since the June meeting, althouth it remains weaker vs. all other majors, includig sterling, the Swiss franc and yen, so it is more a dollar story rather than a euro one.

The other point of note overnight has been the weaker trade data seen in Australia, with the headline deficit the widest since late 2012. The Aussie was pushed down half a cent to 0.9450, but has since stabilisehd and partially recovered. It’s notable that commodity currencie have done well over the past month, with the CAD also pushing levels last seen early January, but as with sterling is starting to look stretched from a technical perspective. Note that Fed Chair Yellen speaks later today at 15:00 GMT.

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