June’s US employment report disappoints traders

The USD was on the retreat against a number of its counterparts on Friday as June’s NFP figure came in lower than expected, implying that the ability of the US economy to create new jobs has loosened. Nevertheless, the report as such tended to send out mixed signals as the unemployment rate ticked down implying that the US employment market tends to remain tight. The release failed to provide support for US stock markets, albeit it did provide some hesitation for stock bears, yet the overall picture of the US employment market is not expected to cause the Fed to hesitate regarding its rate hiking path. Next big test for the USD  is expected to be the release of the US CPI rates for June on Wednesday and should the rates fail to slow down or even show an easing of inflationary pressures in the US economy we may see the USD getting some support. Furthermore, we highlight scheduled statements of Fed officials which could shed more light on the Fed’s intentions and if they sound hawkish enough may provide some support for the USD.

On a technical level, we are to examine the USD’s behaviour against a safe haven instrument (JPY) and a commodity currency (AUD) to spot similarities and differences.

USD/JPY dropped on Friday breaking temporarily the 142.30 (S1) support line, yet was unable to remain below it. Given that the downward trajectory of the pair seems to have been halted we switch our bearish outlook in favour of a sideways movement bias. Should the bears regain control over the pair we may see it breaking the 142.30 (S1) support line, clearly this time and aim for the 140.80 (S2) support level. Should the bulls take over, we may see the pair breaking the 143.65 (R1) resistance line and aim for the 145.10 (R2) resistance level. AUD/USD rose on Friday yet hit a ceiling on the 0.6700 (R1) resistance line and corrected lower. Given that the pair remained in the boundaries of its sideways motion we maintain our bias. Should the pair find extensive buying orders along its path, we may see it breaking the 0.6700 (R1) resistance line and aim for the 0.6770 (R2) barrier. Should a selling interest be expressed by the market we may see the pair breaking the 0.6620 (S1) support line and aim for the 0.6555 (S2) support base.   

Overall we see that the recovery of the USD during today’s Asian session tends to provide the ground for the greenback to rise in both cases, yet that remains to be seen.  

Other highlights for the day:

Today during the European session, we note the release of Norway’s CPI rates for June and Eurozone’s Sentix index for July. In the American session, we note the release of Canada’s building permits for May, while on the monetary front San Francisco Fed President Daly, Cleveland Fed President Mester, Atlanta Fed President Bostic and BoE Governor Andrew Bailey are scheduled to speak. During tomorrow’s Asian session, we note the release of New Zealand’s electronic card sales for June as well as Australia’s July consumer confidence and June’s business conditions and confidence indicators.

As for the rest of the week:

On Tuesday we get Australia’s consumer confidence for July and Business conditions for June, UK’s employment data for May and Germany’s ZEW indicators for July. On Wednesday we get from Japan the corporate goods prices for June and Machinery orders for May and in the American session, we highlight the US CPI rates for June, while on the monetary front we note the release of New Zealand’s RBNZ and Canada’s BoC interest rate decisions. On Thursday we note the release of China’s trade data for June, UK’s GDP and manufacturing output for May, Eurozone’s industrial output also for May, and from the US the weekly initial jobless claims figure and the PPI rates for June. On Friday we note the release of Sweden’s CPI rates for June, Canada’s manufacturing sales for May and from the US the preliminary University of Michigan consumer sentiment for July.

USD/JPY H4 Chart

Support: 142.30 (S1), 140.80 (S2), 138.80 (S3)

Resistance: 143.65 (R1), 145.10 (R2), 146.80 (R3)

AUD/USD H4 Chart

Support: 0.6620 (S1), 0.6555 (S2), 0.6460 (S3)

Resistance: 0.6700 (R1), 0.6770 (R2), 0.6835 (R3)

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