Well, it’s the last report before Valentine’s Day this coming weekend. I’ve got more chance of choosing the correct direction of the USD and other currencies than I have of suggesting the right present(s) or restaurant. Instead of imparting my knowledge on those we’ll stick to currencies I think.
We had the release of US employment figures and the Non-Farm payroll (NFP) figure on Friday. The figures showed that the US economy is proving robust and it continues in the right direction. Indeed, the US economy added 257K new jobs in the first month of 2015. Wages jumped 0.5% after a fall in December. What was the result of this better than expected data? Another surge in the US Dollar.
Over the past week/10 days there has been a pullback in Dollar gains and a retracement higher in GBP/USD and EUR/USD. Do I think this is the start of a weakening USD and a bearish trend? Nope. I think it is a short-term retracement and some respite for EUR/USD and GBP/USD before we have another move lower again.
On EUR/USD I expect a move back to 1.12/1.11 the figure and in the coming weeks we’ll test the 1.10 level. Once we break that level then it is a question of how low do we go. Parity? I doubt that but we'll get close.
GBP/USD? We’ll have another move lower. If you are a buyer of USD then you may want to consider covering off some of your exposure on the move higher in recent trade. I may be completely wrong although I think a move lower will occur. Please contact myself to discuss and we can implement a strategy for you.
If you’re a seller of USD to GBP I suggest implementing staggered ‘take profit’ orders to the downside. I’d suggest 1.52/1.5150 this week.
GBP/EUR? With Greece back in the headlines and the EU summit this week in Brussels there will be volatility on EUR crosses. I don’t think the terms of loans and debt will be amended so I see further pressure on the single currency. This does of course spill over to the UK where contingency plans are being put in place in the event of a ‘Grexit’. In short, the EUR is likely to swing quite wildly this year. I’d suggest placing market orders to the upside on GBP/EUR if you’re a buyer and indeed stagger them to the downside at 50 pip intervals to take advantage of any intra-day moves lower on positive news.
We’ll have a busy week on the currency markets this week so if you have any questions on any of your requirements please send me an email.
Have a great week
Written by Liam Alexander