FOREX: Fed-speak in Focus as QE2 Expiry Follows Dour US Jobs Report | Learn Forex | GoLearnForex.com

Overnight Headlines

• Canadian Dollar Slumps in the Aftermath of US Jobs Report
• Aussie Gains Despite Soft Data as Traders Bet on Hawkish RBA

Critical Levels

The Euro was little changed in overnight trade, with prices consolidating near Friday’s close throughout the session. British Pound price action proved to be a bit choppier but yielded a net flat outcome nonetheless, with the pair oscillating above 1.64 to the US Dollar. We are looking for EURUSD selling opportunities.

Asia Session: What Happened

A quiet start to the trading week saw currency markets in narrow ranges overnight. The Canadian Dollar narrowly underperformed, down as much as 0.2 percent against its top counterparts in the aftermath of Friday’s disappointing US jobs report. A soft US labor market points to weak demand for Canadian exports, close to 80 percent of which are sold in the States, weighing on the outlook for the smaller North American country’s economic growth and ultimately for interest rate hikes.

The Australian Dollar pushed higher despite a disappointing set of economic data, adding as much as 0.5 percent against the majors. A monthly inflation gauge from TD Securities put price growth at the slowest in eight months while ANZ Bank reported that Job Advertisementsfell 6.5 percent in May, marking the largest drop since March 2009. The move higher likely reflects anticipation of the RBA interest rate decision on tap tomorrow, feeding on expectations that the central bank will build on the mildly hawkish rhetoric that emerged last month (perhaps even signaling another increase in July or August).

Euro Session: What to Expect

A slow start to an otherwise busy week of scheduled event risk leaves Euro Zone Producer Price Index figures as the only noteworthy bit on the economic calendar. Expectations call for wholesale inflation to slow for the first time in seven months in April, but a one-off decline will not be enough to meaningfully challenge the steady up trend in place since late 2009, meaning at least several months of weakness will be needed to threaten interest rate hike expectations and thereby the Euro.

Indecision is found on the sentiment front, with S&P 500 stock index futures showing little directional conviction ahead of the opening bell in Europe. A speech from the Federal Reserve’s Charles Plosser, a known inflation hawk and a member of the US central bank’s rate-setting FOMC committee, may prove to be of greatest interest. Traders will be keen to parse the Philadelphia Fed chief’s comments for a reading on how the central bank plans to reconcile the end of its QE2 stimulus program (in just four days) with the acute slowdown in US economic growth, as underscored by Friday’s dour employment figures.

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