ECB hiked rates, US employment report comes into focus

The EUR tended to edge a bit lower against the USD and the pound yesterday, as EUR traders tended to remain unimpressed by ECB’s 25 basis points rate hike, maybe even a bit disappointed as part of the market may have been expecting more. In its accompanying statement the bank stated that “The Governing Council’s future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive” which tended to imply that more rate hikes are to come given also that “The inflation outlook continues to be too high for too long”. Market attention turns across the Atlantic today as in the US we get April’s employment report. The non-farm Payrolls figure is expected to drop below the psychological threshold of 200k and reach its lowest post-pandemic level while the unemployment rate is expected to tick up to 3.6%. Should the actual rates and figures meet their respective forecasts, or be even worse, we may see the USD retreating as the tightness of the US employment market seems to be cracking, possibly also as a result of the Fed’s monetary policy tightening. On the other hand, US stock markets ended the day lower yesterday, and we would note that equity markets participants are expected to navigate through market worries for a recession in the US economy, the Fed’s intentions and earnings reports. Yesterday we saw Apple reporting better than expected earnings per share (EPS) and revenue figures, something that could provide some support for the share’s price, while no high-profile company is expected to deliver its earnings report today, something that may allow for the fundamentals and April’s employment report to lead the way.

USD/JPY seems to be halting its downward trajectory as it remained comfortably between the 135.15 (R1) resistance line and the 132.85 (S1) support line. Please note that the pair’s relative stabilisation seems to be threatening the downward trendline guiding the pair since the 2^nd of May and should the downward trendline be broken clearly we would be forced to switch our bearish outlook in favour of a sideways motion bias initially. For the time being, we note that the RSI indicator remains near the reading of 30 implying a rather bearish sentiment on behalf of the market for the pair. Should the bears maintain control over USD/JPY, we may see the pair breaking the 132.85 (S1) support line and aim for the 130.50 (S2) support level. On the other hand, should the bulls find a chance and grab the reins we may see USD/JPY breaking the prementioned upwards trendline signalling the interruption of the downward movement, and move upwards breaking the 135.15 (R1) resistance line and aim for the 137.55 (R2) resistance level.

USD/CAD edged lower yesterday breaking the 1.3560 (R1) support line, now turned to resistance. Also please note that the RSI indicator is falling, approaching the reading of 30 indicative of a build-up of a bearish sentiment for the pair in the market, hence we expect the bearish movement to be maintained. Should the selling interest of the market continue to be present for the pair, we may see USD/CAD breaking the 1.3465 (S1) support line and aim for the 1.3335 (S2) support level. Should on the other hand the pair find extensive buying orders along its path, we may see USD/CAD reversing course, breaking the 1.3560 (R1) resistance line and aim for the 1.3655 (R2) resistance hurdle.

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Today in the European session, we note the release of Germany’s industrial orders for March, Switzerland’s CPI rates for April, the UK’s construction PMI for April and Eurozone retail sales for March, while on the monetary front, ECB’s Elderson and SNB Chairman Jordan are scheduled to speak. In the American session, besides the US employment report for April, we also note the release of Canada’s employment data for the same month at the same time, while St. Louis Fed President Bullard and Fed Board Governor Cook are scheduled to speak. In Monday’s Asian session, we note from Australia the release of the Building approvals growth rate for March as well as business conditions and business confidence indicators for April, while from Japan BoJ is to release the minutes of its March meeting.