Forex Trading involves high risks, with the potential for substantial losses and is not suitable for all persons. Past performance is not necessarily indicative of future results.

Top Stories

• AUD employment blows out forecasts at 32K vs. -18K eyed
• All eyes on CBs ahead of BoE and ECB rate annoucements
• Asia and Europe bourses up 1%+
• OIl above $72/bbl
• Gold motionless at $966/oz.

Overnight Eco

• NZD Unemployment Change 6.0% vs. 5.7%
• AUD Employment Change much better at 32K vs. -18K
• AUD Unemployment Rate 5.8% vs. 6.0%
• EUR German Factory Orders n/a

Event Risk on Tap

• GBP BOE Rate Annoucement
• EUR ECB Rate Annoucement
• USD Unemployment Claims expected at 595K

Price Action

• USD/JPY pivots 9500 as option activity contains price in 9450-9550 range
• AUD/USD spikes 8460 post labor data but Shanghai drop caps for now
• GBP/USD 1.7000 caps ahead of BoE as traders wary of additional QE annoucement
• EUR/USD very quiet at 1.4400 as markets await Trichet

A very quiet night of consolidation tonight in FX ahead of what could prove to be a volatile session in North America as both BoE and ECB announce their interest rate decisions. The markets expect no change in rates with BoE remaining stationary at 0.5% and ECB holding steady at 1%, but traders will parse every word of guidance with extreme care.

In UK the market participants will be watching  for any announcement regarding further expansion of QE. At the last MPC meeting the BoE pushed the decision on teh issue to August  and given the much better than expected recent UK economic data  expectations are now for a halt to the quantitative easing program altogether which could prove positive to cable and push the unit through 1.7050 and possibly 1.7100 if the BoE issues an unequivocally bullish statement echoing market’s optimism.  However, if as we expect the MPC  remains more tempered in their judgment, reserving the right to extend the program into the year end, cable could correct swiftly on the news.

In the past several days, the unit has decoupled from risk appetite, remaining strong despite lack of further gains in equity prices as currency traders have focused on improving UK fundamentals instead.  However we continue to believe that the uptick in UK economic data is a direct result of much better capital market performance and could quickly reverse if equities see a correction. To that end, the trade in sterling very much remains a trade in risk. If BoE sounds optimistic and equity flows prove supportive the path of least resistance in the pound remains up, but  if the unit reverses today, unable to hold the 1.7000 level it could set the stage for a more serious correction in the next several days possibly to 1.6500 and below.           

Elsewhere, Australian employment data blew out expectations printing at 32K versus -18K forecast as economy Down Under continues outperform everyone else in G-20. Futures markets are now pricing the possibility of a rate hike as early as November, but as we wrote today, “Australia will go as China goes and tonight’s weakness in Shanghai stock index suggests that markets continue to fear more aggressive tightening measures from Beijing which could damage the prospects for further rally in AUD/USD.”

In North America today the calendar is light with only the jobless claims on the docket. Markets are looking for 595K print but if the data creeps back above the psychologically key 600K level it could trigger fears of a double dip recession sparking a selloff in stocks. Both euro and pound have resisted risk aversion flows over the past several sessions but a 100- down day in the Dow and loss of 1000 handle in the S&P could certainly weigh on the units as the day progresses, especially if the rhetoric from central banks proves cautious.

FX Upcoming

Currency	GMT	EST	Release	Expected	Prior
GBP	11:00	7;00	BOE Rate Annoucement		0.5%
EUR	11:45	7:45	ECB Rate Annoucement		1.0%
USD	12:30	8:30	USD Unemployment Claims	595K	584K

About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.