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EUR-, USD-pairs Anxiously Await ECB Today, US NFPs Tomorrow

EUR-, USD-pairs Anxiously Await ECB Today, US NFPs Tomorrow

2015-09-03 11:00:00
Christopher Vecchio, CFA, Senior Strategist
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Talking Points:

- EURUSD trades near rising TL from August lows ahead of ECB.

- AUDUSD, USDCAD consolidate amid trending markets.

- See the September forex seasonality report.

The end of the first week of the month is usually exciting, with a central bank decision or two complemented by the monthly US labor market report, bookending several days of important economic data from around the globe. Yet the excitement and hooplah surrounding the European Central Bank meeting today and the August US Nonfarm Payrolls report tomorrow seem to be lacking something...

...and that something may be active participation in markets. Such is typical for this time of year, particularly in Europe where much of the business world summers along the French Riviera or the Amalfi Coast through the end of August. With markets around the globe closed for various reasons over the next few days (China celebrating the 70 anniversary of the end of WWII; Labor Day in the United States; and Labour Day in Canada), traders may be hesitant to deploy normal positions before 'true' liquidity comes back online.

As such, it's unlikely that today's ECB meeting provokes too great of an incentive for traders to come into the market, knowing well that the US NFP report tomorrow could easily wipe out positions taken today. The market should have the next two days digested by the start of 'normal' trading next week when full participation (or at least the beginning stages of returning to it) arrives.

What we're looking for today from the ECB will be along the forward guidance front rather than actual policy action. In the interim period since the last meeting that provided updates to the central bank's growth and inflation forecasts: the Euro has strengthened against a basket of its major counterparts; and energy prices have resumed their slide. These factors culminate in any environment that could see the ECB reduce its inflation forecasts for 2015 and beyond, offering a dovish blush to an otherwise neutral policy meeting. Accordingly, we'll be looking for ECB President Mario Draghi to reaffirm the central bank's promise to keep its QE program in place through at least September 2016.

See the above video for technical considerations in EURUSD, EURGBP, AUDUSD, USDCAD, and the USDOLLAR Index.

Read more: AUD/USD Down Under $0.7000 as HY, EM FX Pressure Remains

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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