Weak US July employment data weigh on USD

The USD tended to stabilise against its counterparts in today’s Asian session, after tumbling on Friday. The weak US employment data for July, with the main market focus being on the wider-than-expected drop of the NFP figure, implied a rapidly cooling US employment market. The situation worsened as the NFP figures of June and May were also revised lower, by a massive 258k. Also, the unemployment rate ticked up as expected, reaching 4.2%. Market expectations for the Fed to proceed with two rate cuts by the Fed until the end of the year were revived, with the first being expected in the September meeting and the second in the October meeting. The corrections lower of the NFP figure practically enabled US President Trump to fire Bureau of Labor Statistics Commissioner Erika McEntarfer the same day, which adds more worries for a possible manipulation of the figures. Also, the unexpected resignation of Fed Board Governor Kugler tends to create some uncertainty for the independence of the Fed, as US President Trump now has an opening to fill, practically replacing a hawk with a dove. At the same time, market rumors for a possible shadow Chairman to be appointed until Powell’s term ends late spring next year intensified, which may continue weighing on the USD.

USD/JPY tumbled on Friday, breaking the 149.15 (R1) support line, now turned to resistance. Yet the price action bounced on the upward trendline guiding the pair since the 1st of July, which allows for the bullish outlook to be maintained for the time being. On the other hand, we note that the RSI indicator landed on the reading of 50, implying an erasing of the bullish market sentiment for the pair, which in turn may allow for a stabilisation of the pair’s price action to emerge. Should the bulls maintain control over the pair, we may see it breaking the 149.15 (R1) resistance line and start aiming for the 151.20 (R2) resistance level. Should the bears take over, we may see the pair breaking the prementioned upward trendline, in a first signal that the upward motion has been interrupted and continue to break also the 146.25 (S1) support line thus paving the way for the 142.20 (S2) support barrier.

Also Gold’s price edged higher on Friday testing the 3365 (R1) resistance line and tended to stabilise in today’s Asian session just below it. Given the relatively narrow Bollinger bands, the RSI indicator which has landed on the reading of 50 and the precious metal’s sideways motion over the past two and a half months we tend to maintain a bias for the sideways movement to continue. Should the bulls take over, we may see gold’s price breaking the 3365 (R1) resistance line and start aiming for the 3500 (R2) resistance level, which is an All Time High for gold’s price. Should the bears take over, we may see the pair breaking the 3245 (S1) support line thus opening the gates for the 3120 (S2) support level.

Other highlights for the day:

Today we get Switzerland’s and Turkey’s CPI rates for July, Euro Zone’s Sentix index  for August and for the US the factory orders growth rate for June. In tomorrow’s Asian session, we get China’s Caixin Services PMI figure for July and from Japan, BoJ is to release the minutes of the June meeting.

As for the rest of the week:

On Tuesday we get the Czech Republic’s CPI rates for July, Canada’s trade data for June and from the US services PMI figures for July. On Wednesday we get New Zealand’s employment data for Q2 and Germany’s industrial orders for June. On Thursday, we get China’s trade data for July and Australia’s trade data for June, UK’s Halifax House prices for July, Sweden’s CPI rates for July, from the UK we get BoE’s interest rate decision, the US weekly initial jobless claims figure, from the Czech Republic CNB’s interest rate decision, and Canada’s Ivey PMI figure for July. On Friday we get Canada’s employment data for July.

USD/JPY Daily Chart

• Support: 146.25 (S1), 142.20 (S2), 139.60 (S3)
• Resistance: 149.15 (R1), 151.20 (R2), 154.65 (R3)

XAU/USD Cash Daily Chart

• Support: 3245 (S1), 3120 (S2), 2955 (S3)
• Resistance: 3365 (R1), 3500 (R2), 3650 (R3)

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