By FX Empire.com
With the start of a new busy week on Monday the EUR/USD was biased to the downside after the strong rally seen last week. The euro lost grounds with the flow of downbeat data and the creeping skepticism over the new plan.
The dollar was mainly the winner on Monday especially after Japan’s intervention which bolstered the greenback not just against the yen but across the board. Inflation in the euro area held unexpectedly at 3.0% and unemployment worsened to a record 10.2% which reminded investors that the crisis is deep in the area and the slowdown is a big part of the problem.
Reports from China suggested that the nation is not in a hurry to help Europe through the EFSF as previously suggested, yet Russia expressed the willingness to support Europe through the IMF. Those mixed comments only extended the volatility and added more pressure on the pair.
We see the volatility to extend and investors now eye more details on the coming step and how the EFSF will be implemented with comments from the G20 leaders and whether they will indeed endorse the plan or not which will define if the efforts by Europe are going a waste or not.
The lack of data from the euro area on Tuesday will keep the volatility ongoing and focus on the data to be released later in the week and most importantly the rate decision.
The United States will start the day at 14:00 GMT with the construction spending figures for September, with expectations that the index will expand by 0.3% from the previous 1.4% expansion.
The ISM manufacturing will also be released at 14:00 GMT, where the indicator is expected to show improvement to 52.3 from 51.6 in October.
