USD Strengthens After US Employment Report

Mar 08 21, 11:31 GMT

The USD tended to gain against most of its counterparts after an unexpectedly strong NFP figure for February released on Friday. The market sentiment seems to be improving after the release of the US employment report for February which showed that the unemployment rate ticked down while the NFP figure outperformed market expectations easing worries for the US employment market. Also, it should be noted that the US Senate passed Biden’s $1.9 trillion fiscal stimulus plan, which may also remove considerable uncertainty. On the other hand though, we must note that there may be increased uncertainty in the markets in the coming days after the attack on Saudi Arabia’s oil facilities and given that Chinese hackers breached Microsoft’s widely used business email software. Today we expect fundamentals to play a key role in the market’s sentiment also given the lack of high impact US financial releases.

USD/JPY remained above the 107.90 (S1) support line, keeping a rather sideways motion. We maintain our bullish outlook for the pair as long as it remains above the upward trendline which steepened since the 23rd of February. Should the pair find additional buying orders along its path, we may see it breaking the 109.25 (R1) resistance line and aim for the 110.30 (R2) level. Should the pair come under a selling interest of the market we may see it breaking the 107.90 (S1) support line and aim for the 106.60 (S2) level.

Gold prices rise on softer USD

Gold prices tended to gain as the USD wobbled during today’s Asian session as the precious metal’s appeal shined even more. The passing of the US fiscal stimulus plan tended to drive expectations for an accelerating inflation higher, thus increasing demand for gold as a hedging instrument possibly. Also, the easing of the US 10-year yield late in Friday’s session tended to also provide some support for gold’s prices. On the other hand, the uncertainty created over the weekend, may increase safe haven inflows for the USD and thus weaken gold prices temporarily. Overall, should the market consider the precious metal as oversold in the past few weeks, we may see gold’s prices getting some support.

XAU/USD rose during today’s Asian session, aiming for the 1720 (R1) resistance line and breaking the downward trendline characterizing its movement since the 24th of February. As the pair broke the prementioned downward trendline, we switch our bearish outlook initially for a sideways movement of the precious metal’s prices. Should the bears regain control over gold’s prices, we may see it breaking the 1695 (S1) support line and aim for the 1670 (S2) level. Should the bulls take over, we may see gold’s prices breakign the 1720 (R1) resistance line and aim for the 1747 (R2) level.

Other economic highlights today and early Tuesday:

Today during the European session, we note Germany’s industrial output for January and Eurozone’s more forward looking Sentix indicator for March while BoE governor Bailey speaks. During tomorrow’s Asian session, we get from Japan the All Household spending rate for January and the revised GDP rate for Q4, while from Australia we get the Business conditions and sentiment indicators for February.

As for the rest of the week

On Tuesday, we note Germany Trade Data for January and Eurozone’s revised GDP rate for Q4. On Wednesday, we get US and China’s inflation rates for February, while RBA Governor Lowe speaks and BoC releases its interest rate decision. On Thursday, we get Japan’s Corporate Goods prices for February, from the Eurozone ECB’s interest rate decision and the US weekly initial jobless claims figure as well as the Jolts Job Openings for January. On Friday, we get Germany’s final HICP rate for February, the UK GDP rates and manufacturing output for January, Eurozone’s industrial output for January, the US PPI rates for February, Canada’s employment data for February and the US preliminary University of Michigan consumer Sentiment for March.

USD/JPY H4 Chart