The last trading day of the month is here, and people already have the December holidays in mind. The trading month ahead is usually a special one – this year, even more, giving the impact the coronavirus has on traveling and social gathering.
Christmas and New Year holidays come right in the middle of the week, meaning that this year there will be more free days than usual. As such, trading in the second half of the month will be limited as most people take days off.
However, the month ahead remains interesting for at least three reasons. One is the NFP due at the end of this week, another is the ECB the week that follows, and the last one is the Fed one week after the ECB.
Friday’s NFP – The Key Event of the Week
The USD continues to be trashed across the board. The short squeeze for USD bulls continues as the EURUSD, AUDUSD and GBPUSD marched higher during the Thanksgiving week. In the case of the EURUSD, the pair closed the week just shy of 1.20, the ECB’s line in the sand.
Such a strong Euro poses a tough challenge for the ECB, but little the central bank can do if the market continues to sell the USD. What we may see towards the end of the year is some profit-taking. Because the EURUSD trend has continued unabated since March, it could be that some investors will take some profit ahead of the year’s end and the ECB next week.
The Reserve Bank of Australia announces its interest rate this week too. It is expected to leave the conditions unchanged as all eyes this month are on the ECB and the Fed.
This Friday being the first one in the trading month, brings the NFP release. There is always something special about the NFP week, and this week will be no different.
Expect some erratic price action today toward the main London fixing time as the end of month flows will be responsible for an increase in volatility. After that, the focus turns on Friday’s release. Judging by what the initial jobless claims showed so far, the likelihood is that the NFP will miss expectations. If that is the case, the USD may take another hit, putting even more pressure on the ECB.