Will August be Another Great Month for the US Dollar???

Image result for us dollar pictureJuly was a great month for the U.S. dollar and a tough month for other major currencies. The greenback increased in value against many of its global counterparts, hitting multiyear highs in the process. As the month draws to a close and investors look forward to August, everyone is wondering whether the dollar will have enough momentum to charge ahead. August is traditionally one of quietest months in the financial markets with traders around the world taking off for their summer holidays. Volume declines and liquidity decreases which in some cases can mean consolidation and in others continuation.  For the forex market, August is not always a month of consolidation. In 2014 for example, EUR/USD hit year to date lows on a weekly basis in August and in 2012, it reversed violently rising close to 400 pips. 2013 and 2011 were years of consolidation.  For 2015, we expect lower liquidity to translate into greater volatility for the currency market, starting....next week.
the trend for days to weeks to come.  The action heats up with the official Chinese PMI reports followed by revisions to Eurozone PMIs, the RBA rate decision, Bank of England meeting and US non-farm payrolls. Of course there's a long list of other important economic reports that are also due for release but these are the most important events on the calendar and we'll discuss the other reports later in this note.

Given how far the dollar has run in the past few weeks, unambiguously positive data is needed to drive the greenback higher. For the U.S. the focus will be on jobs. The Federal Reserve made it clear that they want to see more improvement in job growth before pulling the trigger on tightening. Economists are looking for payrolls growth to hold steady around 225K
http://xskcvg.com/wp-content/uploads/2012/12/Barack-Dollar.jpgand that will be good enough. As long as there aren't significant misses in any of the underlying components, which includes an increase in average hourly earnings, the dollar could hold onto its gains. However if wage growth slows, the unemployment rate rises or payrolls increase by less than 200K, then the greenback is in trouble.
With three monetary policy meetings, three employment reports, Chinese Data, PMI/ISMs and a Dairy Auction on the calendar, Forex will be the market to trade next week.  The dollar dictated the direction for all currencies this past week, but going forward relative growth and monetary policy divergence will return to focus. We anticipate an extremely active and volatile week with developments that could set