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In the Zone
- According to reports, North Korea have successfully tested a hydrogen bomb over the weekend. We have already seen gaps in the USDJPY and GOLD. Look for comments out of the US today to possibly move the dollar.
The market spent most of the day on Friday sparring as both buyers and sellers were jockeying for position, you got the impression that all day that once the NFP data was released, all pairs would spring into action. We highlighted in this report on Friday, that despite the optimism surrounding the data, we thought we may get a poor read – the September report is almost always a bad report. This report was not bad, it was terrible and the greenback was immediately sold off.
The EURUSD immediately saw a flurry of buyers as the pair broker through recent resistance and started heading towards the 61.8% fib at 1.1975. Within 10 minutes the ECB released a statement that policy makers would not finalize next years QE program until next December and this immediately sent the pair lower own the day. Was this a form of currency manipulation? You bet it was, the ECB are clearly not keen on a EUR this strong, I would be looking for further shorts this week.
The other big mover was the GBPUSD, albeit not as drastic as the EURUSD. The move in this pair got closer to 1.2950 and the reason that this pair moved moderately is because if the ECB want the EUR lower against the dollar, it will also want the pair lower against the GBP and so cross selling in the EURGBP propped up the GBPUSD.
We have a tough say ahead as both the US and Canada are on holiday today, this means that the market will virtually cease at lunch time. Keep an eye on developments in North Korea, we have seen China start checking for radioactive material on their border this morning and have seen comments out of the US. I have said it before that I only see one resolution to this scenario and I believe that it military deployment can’t be far away.
Keep an eye out for the afternoon video that tries to tie everything together.
Important Economic Data out today
10:30 GBP Construction PMI
Effect: Actual higher than expected is good for the GBP
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