As usual, this week's Forex trading will be dominated by Jobs headlines until Friday's Non Farm Payrolls number is released. What is different this week is that the ECB's and Bank of England's Monetary Policy meetings may not have to play second fiddle to the US Jobs number, as Forex watchers are paying increased attention to the pound and euro as they keep falling. Nonetheless, when it is all said and done, the fact that the Non Farms is released will ensure that it will get in the last word.
What I am paying the most attention to this week will be the move in Gold prices. For around the past six months, gold has rallied at the beginning of each Non Farms week. The rationale is that poor jobs numbers will lead to additional stimulus and thereby inflation and dollar devaluation. The move ultimately is guided by the jobs number, but nonetheless shows that the initial bias is increased inflation.
As of this afternoon, Gold is slightly lower, but that may have more to do with the fact that it rallied hard on Friday. The key point is 1125, if it trades above there we could easily see 1140 and beyond.
So where does this all leave us in Forex land? For one, the AUDUSD is an obvious beneficiary. Also, a Gold rally may cause lots of those Pound and Euro positions that have been exited to be stashed into the CAD and NZD.
Ultimately, I see two methods for position trading this week. You can trade the Euro and Pound and watch them pop around based on what news is occurring, which virtually makes them untradeable. Or you can watch Gold prices for market sentiment and use that to trade the Aussie, Kiwi, and Loonie. I prefer the latter, although I will probably look to buy the dips (hopefully just dips) of the Pound and Euro for small quick moves.