My EURUSD forecast this week

The focus of last week had been on the relentless move to the year's high for the currency majors like Eur, Nzd, Aud and of course, the stock markets.

And then came the correction following the FOMC statement on Wed 23 Sep 09 and the pound led decline on Thur. Recall: BOE chairman Mervyn King said a weaker Gbp will help the UK rebalance its economy towards one more dependant on exports. **GBPUSD fell 1.6% (a massive 200 plus pips down move) following that.

The feeling of euphoria that drove the markets higher for several weeks now is seemingly checked and can only be boosted by the occasional M&A activity like today - we hear Abbott and Xerox making multi billion dollar offers for Solvay and Affiliated Computers Systems respectively. The Dow now trades +137 pts and the S&P 500 +1.7% at print. Other than that, we will be in limbo until Q3 earnings are out from next week onwards.

Compared to the previous FOMC's statement, Wednesday's statement highlighted further recovery in the housing market and the fed deemed fit to slow down mortgage securities purchases until end Q1 '10. This effectively leaves the US unemployment rate as the main factor for the USD outlook.

This Friday, the Non Farm Payroll will be released and judging from the trend of better Jobless Claims in the past month or so, there might be a chance for a surprise. The U/E rate is expected to increase to 9.8% from 9.7%.

So I think, together with the slight rise in the dollar index recently, we'll see a firmer comeback in the dollar this week - confirming that a better than expected NFP will boost the dollar.

My expected range for EURUSD this week is 1.4500 (early Sep support) to 1.4850 (shouldn't break last week's all year high)