USD weakens ahead of US employment report for June

The USD weakened against a number of other currencies ahead of the release of the US employment report for June. Markets today are focusing on the release of the NFP figure, which is expected to rise, the unemployment rate, which is expected to drop, while the average earnings growth rate is forecasted to slowdown somewhat. Given that also the initial jobless claims figure is expected to drop and the factory orders growth rate to accelerate, we could see the USD getting some support from today’s financial releases should the forecasts be realised. However, the pace at which the US employment market is bottoming out, may seem a bit slow to some investors and may disappoint the markets. Also note that the rates and figures may miss their targets, as similar recent US readings did. Analysts tended to note that the USD may have also lost some of its appeal given that recent positive financial data may have worn off some of its safe haven qualities and appeal. At the same time, it should be noted that COVID 19 cases in the US, topped 50k per day and re-openings were halted in various states. Also reports mentioning that the US House of Representatives passed a new bill imposing sanctions on banks doing business with China, intensified our worries for the US-Sino relationships. Should market worries intensify on either of the aforementioned fundamental issues, we could see the USD’s safe haven qualities coming to the rescue once again. EUR/USD rose slightly breaking the 1.1230 (S1) resistance line now turned to support. We maintain a bias for a sideways motion for the pair, albeit today’s US financial releases could create substantial volatility for the pair. Should the pair find fresh buying orders along its path, we could see it breaking the 1.1285 (R1) line and aim for the 1.1345 (R2) level which capped the pairs’ ascent on the 16th and 23rd of June. If the pair comes under the selling interest of the market, we could see it breaking the 1.1230 (S1) line and aim for the 1.1170 (R2) barrier which reversed the pairs bearish price action on the 22nd of June.

Pound rallies for a second day

The pound rallied for a second consecutive day against the USD and the EUR yesterday, as the pound showed substantial resilience to bad news. Despite the EU and the UK positions about their post Brexit trade relationships being far apart, a recent Reuters poll showed that the two sides ultimately could strike a deal by year’s end, creating some optimism. According to media though, some 110 business leaders warned Johnson of dire consequences should the UK not secure a deal with the EU. Also, on recent comments EU’s top negotiator rejected a more flexible approach for UK financial services to have access in the EU market. Brexit negotiations as well as the course of the pandemic in the UK could be the main drivers for the pound. GBP/USD against all odds, broke the downward trendline incepted since the 10th of June, 1.2435 (S1) resistance line, now turned to support, and aimed for the 1.2515 (R1) resistance level. As long as the pair remains above the upward trendline formed by cable’s price action over the past two days, we tend to maintain a bullish outlook for the pair. Some stabilisation seems to be in the cards for the pair so be on your guards. Should the bulls maintain control over the pair’s direction, we could see GBP/USD breaking the 1.2515 (R1) resistance line and aim for the 1.2580 (R2) resistance level. Should the bears take over, GBP/USD could break the 1.2435 (S1) support line and aim for the 1.2375 (S2) support level.

Other economic highlights today and early tomorrow

Other than that, on a busy, busy Thursday, among others we get the Swiss CPI rate for June and Eurozone’s producer prices and unemployment rate both for May. In the American session, besides the US financial releases allready mentioned, we also get Canada’s trade data for May. During Monday’s Asian session, we highlight Australia’s retail sales growth rate for May. Also note that ECB’s Mersch and Schnabel are speaking, while BoE releases its financial stability report and US markets will be closed tomorrow.

EUR/USD 4 Hour Chart