USD Gains As Eyes Turn To The US Employment Report

Jul 01 21, 11:12 GMT

The USD tended to gain against a wide range of its counterparts, with the effect being amplified against safe havens JPY and CHF, ahead of the key US Employment report due out tomorrow that could affect the Fed’s monetary stance. Traders are looking to tomorrow’s US non-farm payrolls report for signs on whether the US employment market is tightening or not and recent polls by Reuters expect a gain of 700k jobs created last month and the unemployment rate to tick down to 5.7%. On the other hand, safe haven assets such as Treasuries, the greenback and the Yen seem to remain in demand given the fast spreading of the Delta variant of COVID-19, which could slow down the economic recovery on a global level. Countries such as Indonesia, Malaysia, Thailand and Australia are reported to be struggling with the pandemic while a number of European countries have announced quarantine measures for British subjects. Today’s attention is expected to turn to the US financial releases especially the weekly initial jobless claims and the ISM manufacturing PMI for June.

USD/JPY jumped yesterday breaking the 110.95 (S1) resistance line, now turned to support, breaking the upper line of the symmetrical triangle which encapsulated its price action. We tend to maintain a rather bullish outlook for the pair and given that RSI indicator below our 4-hour chart, remains above the reading of 50, yet on the other hand the pair seems to have stabilised during the Asian session. Should the bulls actually remain in charge, we may see USD/JPY breaking the 111.70 (R1) resistance line and aim for the 112.25 (R2) level. Should the bears take over, we may see the pair breaking the 110.95 (S1) support line and aim for the 109.95 (S2) support level.

CAD remains stable

The Canadian dollar remained rather stable against the USD managing to halt its depreciation, at least temporarily, also supported by the fact that the Canadian GDP rate for April showed that the Canadian economy did not contract as much as expected by the market. It should be noted though that the Canadian dollar for June may have weakened the most against the USD since March last year, as the greenback bulls were fed by the Fed’s hawkish turn and safe haven inflows caused by the pandemic while the loonie failed to benefit from rising oil prices. Nevertheless, CAD traders as well as oil traders are expected to keep a close eye on today’s OPEC meeting and should the oil producing block decide an increase of production levels beyond market expectations, oil prices may weaken with an adverse effect on the CAD.

USD/CAD seems to have stabilised as its price action revolves around the 1.2400 (R1) level. We tend to maintain a bias for a sideways motion given that the pair has broken the upward trendline guiding it since the 28th of June. On the other hand, the RSI indicator below our 4-hour chart is above the reading of 50 implying that the bulls may have a slight advantage. Should the pair find fresh buying orders along its path we may see the pair breaking the 1.2400 (R1) resistance line and aim for the 1.2470 (R2) resistance level. Should a selling interest be displayed by the market, we may see the pair aiming if not breaking the 1.2320 (S1) support line.

Other economic highlights today and the following Asian session:

Today during the European session, we note Switzerland’s CPI rates for June, from Sweden we get Riksbank’s interest rate decision while we also get Germany’s and UK’s final manufacturing PMI for June. In the American session we get from the US the weekly initial jobless claims figure as well as the ISM Manufacturing PMI for June. Also note that ECB President Christine Lagarde, BoE Governor Andrew Bailey and Atlanta Fed President Bostic are scheduled to speak.

USD/JPY H4 Chart