Market Remains Subdued Ahead Of U.S. Payrolls

 | Sep 01, 2016 06:33AM ET

We are back from our holidays and wish you a warm welcome to the trading month of September. Seeing as August is traditionally one of the quietest trading months of the year, not much has happened in the Forex market during our absence. After an upward correction towards the upper bound of the current trading ranges in the EUR/USD and GBP/USD, prices went into a tailspin following Fed chair Janet Yellen's speech in Jackson Hole in late August. While Yellen's speech contained nothing fundamentally new it was Federal Reserve Vice Chairman Stanley Fischer who helped the U.S. dollar to rise against its counterparts. His hawkish comments boosted rate hike odds for September but nonetheless December remains the most likely meeting at which the Fed could change its monetary policy. However, the decision will be dependent on incoming data and the focus therefore shifts to the U.S. payrolls data on Friday. While investors assess the likelihood of a rate rise at the Fed's September meeting, there are also warnings about the incoming employment data, with market participants positioning on only one side of the trade. Bear in mind that job growth in August has come in below analysts' expectations for five consecutive years. This fact may lead to a short squeeze in both currency pairs if tomorrow's report fails to show a strong number.


Now that the summer holiday season concluded, private and institutional investors are gradually returning to the markets, injecting liquidity back into some previously dried up market segments. Still, the market is very calm but traders should prepare for a pick-up in volatility in September. Let us wait and see and look for new profitable opportunities.


EUR/USD
The euro marked a current support at 1.1120 and we are looking for this level to be breached in order to sell the euro towards 1.1050. However, as long as the euro remains firmly above 1.11, we might see an upward correction towards 1.1245 and 1.1330. How the euro will trade within the next 48 hours will hinge on the outcome of the U.S. payrolls.