EURUSD price continues to recover from oversold market conditions as the USD traded lower on Friday, even though the jobs report largely met expectations. The odds for a U.S. Fed September rate hike seem more likely with the non-farm payroll report pointing to strong U.S. job growth. The EUR barely changed in early Monday trade against the dollar but is up against most other currencies. The European calendar is pretty quiet today, with French business confidence from the Bank of France and Sentix Investor Confidence for the Eurozone. Technically, the EURUSD is holding a multi-week succession of lower tops and bottoms. We could see a third attempt for an upward attack on the 1.1120’s as a price bounce off the 1.0850’s, ahead of the resumption of the multi-week price decline from the June 18 high of 1.1436; this is before we see prices grind lower towards my medium term price target area near the 1.0750’s.
German data weakens, with industrial production unexpectedly dipping 1.4% m/m in June data (the median forecast had been for a 0.9% rise). The unexpected sharp contraction in German June production will cast a shadow over Q2 GDP estimates. However, the EUR seems to be ignoring this as EUR buyers are emerging on short term oversold conditions. Early-week markets in Asia are consolidating after Friday’s U.S. jobs report market volatility. Speculation that Beijing will speed up mergers of state owned companies helped support shares, while Japan’s Nikkei was driven by earnings reports, and the Australian market was supported by a strong rebound in bank shares.
Friday’s headline U.S. report printed a 215k July payroll rise with a 0.2% hourly earnings gain that exactly matched estimates, but tiny gains of 101k for civilian jobs and 69k for the labor force after June declines were a disappointment. There was a drop in the jobless rate to a 5.26% cycle-low from 5.28%, though the labor force participation rate remained at a 38-year low of 62.6%. The FOMC is on the verge of its first rate hike since June 2006. However, a tightening is still not guaranteed and there remain some risks that could keep the Fed sidelined.
Currency Pairs, Grouped Performance (% change)
The new Currency Movers Charts show the percentage change from current 5-day percentage change of currencies against the other major currencies.
The AUD is trading higher as the RBA talks about a stronger economy and short sellers get squeezed. Demand for Australian commodities also seems to be improving.
The GBP is trading lower after “Super Thursday” turned out to be a disappointment and the BoE may postpone a rate hike.
Significant daily support and resistance levels for these pairs are:
Main Macro Events Today
• EUR Sentix Investor Confidence: The forecast is for a 20.2 reading up from the previous 18.5, a higher reading will highlight investors confidence in Europe’s economic recovery.
• USD FOMC Member Lockhart Speaks: Due to speak at the Atlanta Press Club and will be taking questions from the audience.