Volatility increase after 4th of July

Not much market activity would be seen while the 4th of July weekend is celebrated. Apparently, thinner market may often be susceptible to wider price fluctuation soon after the holiday trading and the upcoming NFP and the ADP figures which some analyst attributing a slight pull back for unemployment numbers. Likewise , the continued discussions on Greece selective default are weighing on the market, although resolutions to these problems would be on the table for further discussion to avoid and actual defaults by Greece. But the highlight for the week would focus on the NFP figures.

Trading Strategies: Much of last week's market movements were clear, although, the much expected US Dollar decline were attributed to the strength of the Euro recovery as declining Gold prices and oil have contributed to investors shifting interest for the Euro rather than the precious metals. But in spite of the declining metal prices, it has not helped the US Dollar to continue it strength but rather maintained it gradual decline relevant to the weak data from last week that prompted the continued strength for the EURGBP cross rate to move back higher to the 0.9010-60 range levels. Thus supporting our market view report from last week's outlook "Focus on the EURGBP Cross & the EURUSD." Please refer to our video support for this market analysis.

The Asian opening lower for the the USD would continue to have a spillover effect for the mid-week prior to the NFP figures. Leaving enough room for the corrective move although, seen on a short term basis on a daily price movement for the European majors like the Euro. Currently, at the 1.4527 maintaining a fairly flat price due to the current market inactivity from US major investors. Whenever such corrective movements are made we, would be expecting a corrective move midway to an engulfing candlestick bar for the weekly for the Euro coupled with a EURGBP cross rate to move lower towards the mid-price range of 0.8860 or lower levels. Thus making a a bearish signal by the end of this week's trading activity.

The relative contrary movements from between the USDJPY & USDCHF may also be a influential factor for the Euro & Pound to likewise do similar price actions on a day to day basis heading towards the mid-week's trading activities. With the opening of the new month for July, position adjustments would be made clear before any real fresh position trade would be expected for the major participants. Besides, being the beginning of the 2rd quarter of the year's trading, whenever a mid-year ends with the USD lower a probability to follow its cyclical pattern to recover for the third quarter would be logical.

Thus maintaining our long term objective with a long term position for the USDCHF to make a come back. Choosing the USDCHF has been preferred rather taking the USDJPY. As a cross trade in the near future we would consider choosing the between the EURJPY and GBPJPY to maximize the market potential of our USDCHF long term objective as shown on the chart above. As such, positions taken would relatively depend on the size and allocation of trading portfolio that one has. However, we do not recommend that this strategies be applied for retail investors as it carries a higher degree of trading difficulty and risk tolerance to maintain 2 or three simultaneous positions in the market.