Expect Volatility to Build

The opening sessions in Asia and the European market towards the US trading sessions has been lackluster and sluggish with some traders disappointing expectations on the emergency meeting held by the BOJ. As we have expected that such intervention that some analyst are anticipating from the meeting have not materialized.

The upcoming reports towards Friday from the FOMC minutes, initial jobless claims, home sales for July and the more important Non-farm payrolls numbers would be the incentives that will drive the market's volatility higher. Not to mention the coming Labor day holiday that may trigger some liquidation towards the end of the month transactions by major players in the market.

Cautioning traders during these kinds of trading period may result to be more volatile position adjustments before the closing month and opening of the new month will trigger wider price swings on both directions. However, the present technical conditions for the major pairs have been heading lower for the Euro and the Pound at the 1.2675 and 1.5465 respectively and has not shown any real market recovery from last weeks movement. The reluctance of traders to create positions is quite obvious. Meanwhile the USDJPY and the USDCHF has moved to its lower band while formation a basin-like formation for the weekly charts much lower from the 21 week MA on both pairs. Currently still at the 84.67 for the USDJPY and 1.0254 for the USDCHF. Although, the USDCHF is nearing a possible SNB intervention price but is closely watching the USD behavior prior to the market news this coming Friday.

In most cases, the directional trend for the USD would be opposite before the news on the Non-farm payrolls and the actual movement lower would be after the news reports at the mid-trading session of the US closing hours. this would hold true to its historical behavior depending on the volumes accumulated during the mid-week as most institutional traders in the interbank market would prefer to trade the cross rates rather than go straight majors. The advantage of trading with interbank as currency conversions and Forex collateralized trading are available to sophisticated accounts held at their bank for purposes of hedging and other clearing services that allows other investors to hold other foreign currencies on their books.

Holding cash/ spot currency transactions with strategies to buy currency options for arbitrary hedging purposes would be ideal. However, it does take a lot more than simply trading straight through with the regular currency pairs being offered in the open market by retail brokers. As what Warren Buffet used to say, that some traders or investors would want to be aggressive at the same time be fearful of the market as volatility kicks-in the market place.

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