New highs for the EURUSD
The EUR lagged other currencies in making new lows vs the USD, but the EURUSD has just moved to a new high (new dollar low). The pair traded to a new high of 1.18602, taking out the earlier high at 1.18588.
The next targets comes against the
- 38.2% retracement of the move down from last Friday’s high. That comes in at 1.18708.
- The falling 100 hour moving average is at 1.18755.
- A swing area comes in between 1.1877 and 1.18815 (see green numbered circles and upper yellow area).
If the buyers are to assume more control, getting above those resistance levels are the minimum requirements. Falling short of those levels, and the corrective move higher is a plain-vanilla correction.
A move above that upper cluster of resistance would then look to tackle the 200 hour moving average at 1.19039.
OPEC+ meeting is in session
Crude oil is currently trading at $75.11 or up nine cents.
Mixed results for the European indices today
The major European indices are ending the session with mixed results and modest changes.
The provisional closes are showing:
- German DAX, +0.2%
- France’s CAC, -0.1%
- UK’s FTSE 100, -0.1%
- Spain’s Ibex, -0.5%
- Italy’s FTSE MIB, -0.1%
For the week,
- German DAX, +0.2%
- UK’s FTSE 100, -0.2%
It is all about the NFP release today
The payrolls figure will once again steal the headlines initially but barring any shocks and/or surprises, I would say that the devil will be in the details when it comes to digesting the report as a whole.
A strong headline number plus solid readings in wages and the unemployment rate will no doubt provide an added lift to the dollar, after having seen such solid momentum already this week – even stretching key technical levels over the past few days.
But a strong headline number coupled with poor wages growth will make for a more interesting market reaction in the aftermath. The Fed has brushed aside rising inflation as temporary, yet they stepped up rate projections in their last meeting in June.
As such, one can argue that there can’t be lasting inflation without wages and that may make the figure a more important detail to pay attention to than the payrolls number itself as well as the unemployment rate.
If there were to be a lasting market reaction, both in the dollar and Treasuries, to anything, it is likely to come if wages do show some kind of major beat/miss.
That should be able to convince some quarters of the market that the Fed needle is moving but again, this is just one report which is still marred by the effects of the pandemic.
It will take more for the market to be sure but the other thing to remember is that we are running out of time in trying to price in such certainty.
Jackson Hole is just around the corner and some market participants expect a general shift in tone by the Fed then. Perhaps this is what is needed to kick start that drive in expectations and when you think about it, maybe it has already begun for the dollar.
EUR/USD down slightly to 1.1839
The technical picture will be a key consideration going into the payrolls release later today with EUR/USD flirting with a drop below the 18 June low @ 1.1847 as the low today touches 1.1839, with sellers continuing to eye a break towards the 1.1800 level.
The dollar seems to be adamant in holding firmer ground ahead of the jobs report later but keep in mind that there will be large chunks of expiries in EUR/USD from 1.1820 through to 1.1915 and that could keep things more sticky just above 1.1800.
In terms of sentiment, a lot will depend on what the jobs report offers later in the day so while sellers are testing the boundaries for now, it isn’t a given just yet.
The bid in the greenback this week has been unrelenting
The dollar is stretching gains across the board now as the narrow ranges are starting to expand in early European morning trade.
EUR/USD is down to 1.1827 with sellers eyeing 1.1800 next while GBP/USD has eased to 1.3745 as the drop below 1.3800 gathers further momentum for now.
Elsewhere, AUD/USD is tracking to fresh lows since December last year with support at 0.7462 starting to give way to a potential drop towards 0.7400 next:
It is all about the US non-farm payrolls today
We’re going through the typical pre-NFP lull again and that is likely to stretch on to European trading with market participants honed in on the jobs report later.
There will be added focus on wages and the unemployment rate outside of the headline figure but overall, this shouldn’t be a report that makes or breaks the Fed’s view.
Powell & co. will ultimately decide by themselves how much of a hawkish tilt they would wish to share in the months ahead and that’s not going to rest on one single jobs report, although this will help in trying to allow them flexibility in doing things I guess.
Nonetheless, with FX and the dollar on the edge of its seat from a technical perspective, this could be what is needed to nudge things along before the weekend approaches.
EUR/USD continues to hang near the 18 June low @ 1.1847, testing waters just below that since yesterday. Meanwhile, USD/JPY has moved up to its highest levels since March last year but faces resistance around 111.50-71 for the time being.
GBP/USD has also broken below 1.3800 to its lowest since mid-April with there being little technical support until the double-bottom in March and April near 1.3670.
Elsewhere, AUD/USD has fallen to its lowest levels this year but there is support from the 21 December low @ 0.7462 while USD/CAD is contemplating a push further away from its 100-day moving average with the June highs @ 1.2480-87 in focus.
0900 GMT – Eurozone May PPI figures
Prior release can be found here. A lagging and proxy indicator of price pressures but estimates are for a continued tick higher, which reaffirms rising cost pressures in general – largely due to supply constraints still persisting.
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.
ECB President Christine Lagarde is a panel participant
- The topic is “What have we learnt in 2020?” (I’m gonna guess it’s not “learning to program in Java”)
- From 1430 central European time (which is 1230 GMT)
Heads up for any comments from her on the European economy or ECB policy.