The USD strengthened yesterday at some point, as financial data revealed that the US economy may be in a better shape than expected. Private payrolls, Factory orders and the ISM non manufacturing PMI outperformed expectations and gave the USD a boost. The next big test for the USD is expected to be the release of the US employment report for August, today at 12:30 (GMT). Should the rates and figures meet their respective forecasts, we could be seeing the picture of a rather tight US labor market. It should be noted though that the expected drop of the NFP figure and the slight deceleration of the average earnings growth rate could be providing a shadow of a doubt for investors, regarding the USD. Albeit we expect the release to be closely watched by the Fed, it may prove difficult to sway the opinion of the market for a rate cut in the September meeting. Also, we expect the market to be closely watching Jerome Powell’s speech about monetary policy later on.
EUR/USD rose yesterday, yet as the USD strengthened during the American session, the pair relented most of the gains made and remained below the 1.1050 (R1) resistance line. As the pair broke the upward trendline incepted since the 3rd of September, we switch our bullish outlook in favour of a sideways movement for the pair. Please be advised that the pair could experience substantial volatility later today as the US employment report for August is due out and Fed’s chairman Jerome Powell, is scheduled to speak later on. Should the bulls take over once again, we could see the pair breaking the 1.1050 (R1) resistance line once again and aim for the 1.1100 (R2) resistance level. Should the bears take over, we could see the pair breaking the 1.1000 (S1) support line aiming for lower grounds.
JPY weakens further on fragile trade tension easing
The Yen slipped on Thursday as global tensions including the US-Sino trade tensions eased somewhat. Investor confidence was boosted providing a more risk on orientations for the market. The characteristic of the day was the agreement for high level talks between Beijing and Washington and analysts tend to note the positive effect of the developments for the troubled lately markets. It should be noted that easing may prove fragile and we retain a more pessimistic view as to the extent of the negotiations. Also analysts tend to note that funding currencies were on the retreat as tensions ease on a global basis. We see some early signs of stabilization though as the markets have started to digest the impact of the recent developments. USD/JPY rose yesterday breaking the 106.60 (S1) resistance line (now turned to support) and at some point tested the 107.20 (R1) resistance level. For our bullish outlook for the pair to change, we would require USD/JPY to break the upward trendline incepted since the Wednesday. Should the pair find fresh buying orders along its path we could see it breaking the 107.20 (R1) resistance line and aim for he 107.75 (R2) resistance level. Should the pair come under the selling interest of the market, we could see it breaking the 106.60 (S1) aiming for lower grounds.
Other economic highlights today and early tomorrow
Today during the European session, we get Germanys’ industrial production growth rate for July, UK’s Halifax house price index for August and Eurozone’s final GDP growth rate for Q2. In the American session besides the US employment report for August, we also get Canada’s employment data for August and the US Baker Hughes oil rig count. On Monday’s Asian session, we get Japan’s final GDP growth rate for Q2 and Australia’s housing finance growth rate for July. As for speakers please take note that Jerome Powell is to speak in Switzerland about monetary policy today yet bear in mind that BoE’s Ramsden is also scheduled to speak.
USD/JPY H4
Support: 106.60 (S1), 106.00 (S2), 105.30 (S3)
Resistance: 107.20 (R1), 107.75 (R2), 108.35 (R3)
EUR/USD H4
Support: 1.1050 (S1), 1.1100 (S2), 1.1155 (S3)
Resistance: 1.1000 (R1), 1.0950 (R2), 1.0910 (R3)
