Another week of high volatility expected on the Forex market

EUR:

Last week, the EUR/USD closed at almost exactly the same level at which it had started, opening at 1.3279 and closing at 1.3284. It oscillated between the two extreme values of 1.3344 to the upside and 1.3188, which suggests that there was high volatility on the main Forex pair.

This week's major driver for the pair will be the ECB monthly report, which is expected to add volatility.

USD:

The US dollar looked set to take out key highs versus the Japanese yen, euro and other counterparts. However, a disappointing US Nonfarm Payrolls report left dollar bulls wanting, and yet the S&P 500 finished at record highs.

The Reserve Bank of Australia interest rate announcement and the trade and inflation figures from China could be the main market drivers for the dollar index - especially as the Aussie and New Zealand dollar were the worst performing major world currencies throughout last week.

GBP:

Despite encouraging economic data, the British pound has weakened over the past few weeks, as investors worried that the new BOE Governor Mark Carney would take monetary policy into a more accommodative direction. However, so far Carney has shown little inclination to increase QE or lower rates, and at the beginning of the week, strong PMI data results demonstrate unequivocally that the UK economy is rebounding strongly without any additional stimulus.

British pound traders will be watching Carney's speech in front of the UK parliament closely. It will be held Wednesday, following the Bank of England quarterly inflation report.

JPY:

USD/JPY closed the week higher at 98.86 after a brief surge above the 100 levels, which it could not sustain for long because of the weak US labour market report from July.

The main market driver of the week for the yen will be the Bank of Japan interest rate decision, followed by the monetary policy statement. However, the probability of further rate cuts from the BoJ remains low.

AUD:

The Australian dollar recorded the largest five-day decline in almost two years last week, closing near the lowest level since September 2010 against its US counterpart amid speculations of a probable rate cut of 25 basis points by the Reserve Bank of Australia. According to analysts, more monetary stimulus is still needed to help Australia's economy make the transition from mining investment to more broader-based growth.

On Tuesday, the 25 basis-points cut to the target rate was expected by 26 of 27 Bloomberg surveyed economists, and therefore did not have the negative effect on the Aussie that is usually expected from a rate cut.

Following the rate cut, the RBA said that slow growth is expected to continue in the near term and the economy is now adjusting to lower levels of mining investment. The commentary regarding inflation, possibly implying an end to the rate cuts for the time being, probably led Aussie traders to push AUD/USD 50 pips higher.

NZD:

The NZD started the week on a negative note; the kiwi slid more than 1% against the US dollar. NZD/USD posted a low of 0.7737, approaching the one-year low of 0.7683 touched June 24. The pair opened nearly 100 pips lower following news that China and Russia, and most probably more countries to follow soon, had halted imports of New Zealand milk powders after Fonterra, the world's largest dairy exporter, announced that three batches of whey protein "may have been" contaminated with botulism-causing bacteria. Since milk powders accounted for 15% of the total New Zealand exports in 2012, such news gave a good reason for the market to be concerned about New Zealand's economic outlook.

In order to recover, the market will need to be reassured, and so far that is not the case, according to Trade Minister Tim Groser, who told Radio New Zealand, "We sell NZ$13.5 billion ($10.5 billion) of dairy products around the world. Is all of this at risk? In some purely theoretical sense, yes."

Gold:

The gold price surged up $34 an ounce after the much-anticipated U.S non-farm payrolls report missed expectations - reducing chances of the Federal Reserve tapering its bond purchases at the upcoming FOMC meeting in mid-September.

On Friday, gold rallied 2.65% from an earlier low of $1,283 an ounce to $1,317 per ounce within less than an hour of the report being published. Friday's non-farm payrolls data boosted the yellow metal, as the report disappointed with a print of just 162K jobs added in July, missing estimates of 185K.

Gold prices rallied back above the $1,300 level as the US dollar came under pressure. Although the data missed expectations, the headline unemployment rate dropped from 7.6% to 7.4%, topping estimates calling for a reading of 7.5%.

The Federal Open Market Committee has communicated explicit targets it wants to see met before it stops quantitative easing, which are a 6.5% unemployment rate and a 2.5% inflation rate.

That target is still a long way off, and if we continue seeing job growth at the same rate - about 200,000 jobs per month, then the Federal Reserve is not likely to hit its targets.

It means that commodity traders can look forward to another decade of highly profitable trading opportunities in the precious metals market.

Vincent Pellizzari is a trader at RTFX Ltd.