Market shrugs off hotter than expected US employment report

The USD got some temporary support against its counterparts on Friday as the US employment report for March on Friday came in hotter than expected with the NFP figure rising, instead of dropping as expected and the unemployment rate ticked down. Overall, the tightness of the US employment market practically provides a leeway for the Fed to maintain a tight monetary policy for longer, while attention now turns to the release of the US CPI rates for March due out on Wednesday. Should the CPI rates fail to slow down, that could harden the stance of the Fed. Also please note that the market which was expecting the bank to deliver its first rate cut in the June meeting has shifted its expectations for July. Yet, US yields tended to be on the rise, reaching levels not seen since end of November, early December last year. It was characteristic how the market ignored the release as Gold’s price and US stockmarket indexes ended Friday in the greens.

We highlight the bullish tendencies of gold as geopolitical tensions especially around the Middle East with the war in Gaza in the epicenter, are escalated which may be  providing safe haven inflows for the precious metal. On second note we also note a possible escalation of tensions in the south China sea which may elevate the uncertainty of the market with possible adverse effect for riskier assets especially the Aussie. At the same time, we also note the possibility of speculative buying of gold pushing its price higher as a self-fulfilling prophecy.              

Other highlights for the day:

Today we get Germany’s industrial output for February and Eurozone’s Sentix index for April, while on the monetary front SNB Chairman Thomas Jordan and Riksbank Governor Erik Thedeen speak. During tomorrow’s Asian session, we get Australia’s NAB Business Conditions and Confidence for March and earlier Minneapolis Fed President Kashkari speaks.

On a technical level, EUR/USD despite a hiccup remained relatively unchanged moving between the 1.0890 (R1) resistance line and the 1.0740 (S1) support level. Given the pair’s sideways motion over the past 48 hours we tend to maintain our bias for the same direction currently, yet that may alter. For a bullish outlook we would require the pair to rise break the 1.0890 (R1) resistance line clearly and take aim if not test the 1.1010 (R2) resistance hurdle. Should the bears take over, we may see the pair breaking the 1.0740 (S1) support line and start aiming for the 1.0615 (S2) support barrier a level that has not seen any price action since early November last year.

Similarly, AUD/USD maintained its sideways motion between the 0.6620 (R1) resistance line and the 0.6515 (S1) support level. We tend to maintain our bias for the pair’s rangebound movement to continue as long as the prementioned levels are respected by the price action. Should a selling interest be expressed by the market, we may see AUD/USD breaking the 0.6515 (S1) support line and if broken we set the next test for the bears at the 0.6400 (S2) support level. Should the buyers take charge of the pair’s price action, we may see the pair breaking the 0.6620 (R1) resistance line and taking aim of the 0.6725 (R2) resistance base, a level that resisted the pair’s upward pressure for the last time early December last year.

As for the rest of the week

On Tuesday we get Australia’s business conditions and confidence for March. On Wednesday we get Japan’s corporate goods prices for March, Sweden’s GDP rate for February, we note Norway’s and the Czech Republic’s CPI rates for March and we highlight the release of the US CPI rates also for March and on the monetary front, we note the release of the RBNZs’ and BoC’s interest rate decisions as well as the Fed’s March meeting minutes. On Thursday we get China’s inflation metrics for March, Norway’s GDP rates for February and from the US we get the weekly initial jobless claims figure and the PPI rates for March and ECB is to release its interest rate decision. Finally on Friday, we get China’s trade data for March, Germany’s and France’s final HICP rate for March, UK’s GDP and manufacturing output rates for February, Sweden’s CPI rates for March and the US preliminary University of Michigan consumer sentiment for April.

EUR/USD H4 Chart

Support: 1.0740 (S1), 1.0615 (S2), 1.0450 (S3)

Resistance: 1.0890 (R1), 1.1010 (R2), 1.1140 (R3)

AUD/USD H4 Chart

Support: 0.6515 (S1), 0.6400 (S2), 0.6270 (S3)

Resistance: 0.6620 (R1), 0.6725 (R2), 0.6870 (R3)

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