USD weakens after US employment report for December is out

The USD was on the retreat against its counterparts despite the release of the US employment report for December showcasing a tight US employment market for the past month with the unemployment rate dropping and the NFP figure dropping as well yet less than expected. The release as such tended to provide a breath of life to the Fed’s idea of a possible soft landing of the US economy, from its monetary policy tightening, as the employment market tended to remain tight despite the continuous rate hiking. At the same time, we must note that the report tends to allow the Fed to continue on an aggressive rate hiking path, yet the market’s and our expectations are for the bank to ease its monetary policy tightening. Attention now shifts toward the release of the US CPI rates for December on Thursday and a possible slowdown of the inflationary pressures in the US economy could raise market expectations for an easing of the Fed’s hawkish stance even further. Also, the improvement of the market sentiment due to China’s reopening may have caused some safe haven outflows for the greenback and further indications for a recovery of the Chinese economy could improve market sentiment even further. On the monetary front this week a number of Fed policymakers are scheduled to speak and could sway the market’s opinion, yet the main interest is on Fed Chairman Powell who is scheduled to speak on Tuesday.

EUR/USD was on the rise on Friday and during today’s Asian session, aiming for the 1.0715 (R1) resistance line. We tend to maintain a bullish sentiment for the pair given that the RSI indicator is rising and nearing the reading of 70. Should the bulls actually maintain control over the pair, we may see it breaking the 1.0715 (R1) resistance line and aim for the 1.0845 (R2) resistance level. Should the bears take over, we may see the pair breaking the 1.0585 (S1) support line and aim for the 1.0440 (S2) support level.

USD/JPY dropped breaking the 132.00 (R1) support line, now turned to resistance. The pair seems to stabilize given its price action in today’s Asian session, yet bearish tendencies seem to continue to be present as well. Should the selling interest be renewed, we may see the pair breaking the 130.50 (S1) support line and aim for the 128.60 (S2) support level. Should the bulls take over, we may see the pair reversing course breaking the 132.00 (R1) resistance line and aim for the 133.90 (R2) level.  

Other highlights for the day:

Today in the European session, we get Germany’s industrial output growth rate for November, Eurozone’s Sentix index for  January and unemployment rate for November, while later on we note the release of Canada’s leading index for December and the building permits growth rate for November. During tomorrow’s Asian session we get from Japan, Tokyo’s CPI rates for December.

As for the rest of the week:

On Tuesday, we note the release of Turkey’s unemployment rate for November, Norway’s consumer Price index for December and France’s Industrial output for November. On Wednesday we get Australia’s CPI rates and retail sales growth rate, both being for November while from the Czech Republic we note the release of the CPI rates for December. On Thursday we get Japan’s current account balance for November, Australia’s trade data for November, China’s CPI rates for December, we highlight the US CPI rates for December while we also note the weekly initial jobless claims figure. On Friday we note the release of China’s Trade data for December, UK’s GDP and manufacturing output growth rates for November, Sweden’s CPI rates for December, France’s final HICP rates for December, Germany’s full year GDP rate for 2022, Eurozone’s Industrial output growth rate for November as well as the US university of Michigan consumer sentiment for January.

EUR/USD H4 Chart

Support: 1.0585 (S1), 1.0440 (S2), 1.0295 (S3)

Resistance: 1.0715 (R1), 1.0845 (R2), 1.1000 (R3)

USD/JPY H4 Chart

Support: 130.50 (S1), 128.60 (S2), 126.50 (S3)

Resistance: 132.00 (R1), 133.90 (R2), 135.65 (R3)

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