April’s US employment report failed to excite traders

The USD showed little reaction on Friday yet seemed to gain against its counterparts during today’s Asian session. Overall, the release of the US employment report for April failed to excite traders as despite the Non-Farm Payrolls figure remaining relatively at the same levels as in March and not dropping as the market expected, the unemployment rate failed to tick down and remained unchanged. We note as the next big test for the greenback the release of the US CPI rates for April on Wednesday and a possible deceleration could ease the market’s pressure on the Fed to hike rates as it may signal that inflation has peaked and is easing in the US economy. Despite the average earnings growth rate failing to accelerate, US yields were still on the rise which could provide support for the greenback.

Given the lack of high impact financial releases today from the US we expect fundamentals to take over the lead for the USD as well as the US stockmarkets, which ended Friday and the week in the reds implying some cautiousness on behalf of the markets. On the flip side we must note the drop of the Australian Dollar as fundamentals from China tend to weigh on the commodity currency given the concerns for China’s economy which is closely linked to the Australian economy. It should be noted though that China’s trade data were better than expected with its import growth rate, which is the main concern for Aussie traders, halting the contraction expected for April and the trade balance rose. Should  the market sentiment for China’s economy continue to be worrisome we may see the AUD slipping further. 

The USD Index rose during today’s Asian session breaking the 103.85 (S1) resistance line now turned to support. We tend to switch our bias for a sideways movement in favour of a bullish outlook as the pair’s price action has broken the upper boundary of its sideways movement. Should the bulls take over, we may see the USD index breaking the 104.70 (R1) line and aim for the 105.60 (R2) level. Should the bears say enough is enough and take over, we may see the pair breaking the 103.85 (S1) line and aim for the 102.90 (S2) level.

AUD/USD dropped during today’s Asian session, breaking the 0.7050 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair as long as it remains below the downward trendline incepted since the 5^a. of May. Should the selling interest of the market be maintained we may see AUD/USD breaking the 0.6970 (S1) support line and aim for the 0.6840 (S2) level. Should the pair find fresh buying orders along its path we may see the pair breaking the prementioned downward trendline as a first sign of a trend reversal, the 0.7050 (R1) resistance line and aim for the 0.7165 (R2) level. 

Other highlights for today

Today, in the European session we note the release of Eurozone’s forward looking Sentix Index for May, while on the monetary front during the American session we note the planned speeches of Atlanta Fed President Bostic and BoE MPC member Saunders. During Tuesday’s Asian session, we note the release of New Zealand’s electronic card sales growth rate for April, Japan’s all household spending growth rate and Australia’s NAB business conditions as well as business confidence both being for April as well as the retail trade for Q1.

As for the rest of the week

On Tuesday we get Norway’s and the Czech Republic’s CPI rates for April as well as Germany’s ZEW indicators for May. On Wednesday we get China’s inflation metrics for April and highlight the US CPI rates for April. On Thursday we note the release of Japan’s current account balance for March, UK’s GDP rates for Q1 and March as well as UK’s manufacturing output growth rate for March, Sweden’s CPI rates for April and the US weekly initial jobless claims figure. On Friday we get Norway’s GDP rates for Q1, Eurozone’s industrial production growth rate for March and the preliminary US University of Michigan consumer sentiment for May. 

USD Index H4 Chart

Support: 103.85 (S1), 102.90 (S2), 102.10 (S3)

Resistance: 104.70 (R1), 105.60 (R2), 106.40 (R3)

AUD/USD H4 Chart

Support: 0.6970 (S1), 0.6840 (S2), 0.6745 (S3)

Resistance: 0.7050 (R1), 0.7185 (R2), 0.7285 (R3)

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