USD’s gains remain capped after US employment report

USD tended to gain against most of its counterparts on Friday, after a stellar employment report, where the NFP figure rose substantially, yet gains seem capped amidst low volatility. On the other hand, gold prices tended to remain rather steady during today’s Asian session after Friday’s substantial gains driven by high inflation expectations after the US employment report for March was released. Last but not least US stockmarkets tended to gain on Friday with Dow Jones and S&P 500 reaching new record highs, indicative of the optimism in the markets after the great US employment data for March and as some worries for the US employment market tended to ease somewhat. Today, we expect market attention to be on the release of the US financial data, especially March’s ISM PMI for the non-manufacturing sector, which is expected to show whether expansion of economic activity has accelerated and if so, by how much.
GBP/USD remained relatively stable on Friday and during today’s Asian session, testing the 1.3845 (R1) resistance line. We tend to maintain a bias for a sideways movement, yet at the same time we suspect that the bulls may have a slight advantage given that the RSI indicator below our 4-hour chart runs between the readings of 50 and 70. Should the bulls actually take charge of the pair’s direction, we may see the pair breaking the 1.3845 (R1) resistance line and aim for the 1.3990 (R2) resistance level. Should the bears take over, we may see cable breaking the 1.3700 (S1) support line and aim for the 1.3565 (S2) support level.

Aussie traders eye RBA’s interest rate decision

Aussie traders are expected to keep an eye out for RBA’s interest rate decision, due out during tomorrow’s Asian session. The bank is widely expected to remain on hold at 0.10% and AUD OIS imply a probability of 98.5% for such a scenario to materialize. In a recent Reuters poll, all economists participating supported this scenario. We expect the bank to maintain its dovish tone in Governor Lowe’s accompanying statement, and we would not be surprised to see the bank reiterating that it will “not increase the cash rate… until 2024 at the earliest”. Overall, we maintain a view of the risks associated with the event as skewed to the downside for the AUD currently. On a fundamental level, we would highlight the risk of a possible deterioration of the US-Sino as well as the Australian-Sino relationships, which could weaken the Aussie.
AUD/USD dropped slightly and maintained a relatively sideways motion, testing constantly the 0.7600 (S1) support line. We tend to maintain our bias for a sideways movement, given also that the RSI indicator below our 4-hour chart runs along the reading of 50 implying a rather indecisive market. Should a selling interest be displayed we may see AUD/USD breaking the 0.7600 (S1) support line and aim for the 0.7545 (S2) support level which reversed the pair’s downward motion on the 1st of April. Should the pair find buying orders along its path, we may see AUD/USD breaking the 0.7665 (R1) line and aim for the 0.7725 (R2) resistance barrier.

Other economic highlights today and early Tuesday:

In today’s European session we note Turkey’s CPI rate for March, while in the American session, we get the US factory orders for February and the ISM non-manufacturing PMI for March. During tomorrow’s Asian session, we note Japan’s household spending for March as well as China’s Caixin services PMI for March.

As for the rest of the week

On Tuesday’s European session we note Eurozone’s forward looking Sentix index for April. On Wednesday, we get Eurozone’s final Markit Composite PMI for March, UK final Services PMI for March, Canada’s trade balance for February, Canada’s Icey PMI for March and the Fed releases the minutes of its last meeting. On Thursday, we get Japan’s current account balance for February, Germany’s industrial orders growth rate for February and the US weekly initial jobless claims figure. On Friday, we note the release of China’s CPI and PP rates for March, Germany’s industrial output growth rate for February, Norway’s CPI rate for March, UK’s Halifax House Prices for March and Canada’s Employment data for March.

GBP/USD H4 Chart

Support: 1.3700 (S1), 1.3565 (S2), 1.3450 (S3)

Resistance: 1.3845 (R1), 1.3990 (R2), 1.4145 (R3)

AUD/USD H4 Chart

Support: 0.7600 (S1), 0.7545 (S2), 0.7485 (S3)

Resistance: 0.7665 (R1), 0.7725 (R2), 0.7785 (R3)

If you have any general queries or comments relating to this article please send an email directly to our Research team atresearch_team@ironfx.com

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