Talking Points:
•The June US payrolls fell short of the market-moving potential necessary to force a USDollar break
• Euro and risk-directed trades (like Yen crosses) will struggle for movement before the week closes
• Pairs like AUDCAD, GBPAUD and perhaps even GBPUSD may be more capable of playing out their technicals
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Following a ten-month rally, the USDollar has spent the past few months developing a congestion pattern. With the boundaries closing in, the potential for a breakout is starting to stir speculators' interests. The same patterns are reflected in many of the dollar based majors - EURUSD, USDJPY, AUDUSD - and even equities. The Dollar is driven by rate expectations while stocks are the domain of 'risk trends'. Yet, both are going to struggle for motivation until more potent drivers come along. NFPs has added to the Fed rate forecast but not settled the debate between hawks and doves. The weekend Greek vote hangs over the Euro and general sentiment. Liquidity is also a hurdle with the US markets off early for an extended holiday weekend. There is plenty of pressure building up, but satisfaction is unlikely to come until at least next week. Given the circumstances, some positions should be taken off (like my EURJPY short) or avoided; while others may present opportunities in exactly the conditions that soothe (such as AUDCAD and GBPUSD). We discuss approach an expectations in today's Trading Video.
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