exceeded expectations, extending its impressive winning streak to 14. However,
upon closer examination, the report didn’t present particularly favourable
details. The unemployment rate saw a significant increase from 3.4% to 3.7%,
marking the largest month-over-month jump since the pandemic began.
Additionally, the average workweek hours showed a slight decrease, which is
often an indication that employers may be considering layoffs. All in all, the
report contained a mix of information that could be interpreted differently by
different individuals.
Moving on to the US ISM Services PMI, it came in much lower than
anticipated at 50.3, narrowly missing the threshold for contractionary
territory. The employment sub-index reflected a contraction, and the prices
paid sub-index experienced a substantial decrease, returning to the levels seen
in May 2020. Consequently, the market responded by further discounting the
possibility of additional interest rate hikes by the Federal Reserve (Fed).
Moreover, recent surprising
rate hikes by the RBA and the BoC may have influenced risk sentiment, leading
to concerns that the Fed might follow suit. However, it is unlikely given that
the Fed typically aligns its actions with market pricing, and we should also
consider that the CPI report has not yet been released.
EURUSD Technical Analysis –
Daily Timeframe
On the daily chart, the EURUSD seems to be
bottoming out at the key 1.07 support level as
the price started to range around it and the market priced out hawkish
expectations for the June meeting. The bias remains bearish as the moving averages have
crossed to the downside and the trend is still downward. The possible double top at the
1.1033 high might indicate that we still have some room to the downside to
touch at least the 1.0533 neckline, but watch out for the price action in the
following days and after the CPI and FOMC next week.
EURUSD Technical Analysis –
4 hour Timeframe
On the 4 hour chart, the price has broken out of
the falling channel as it started to range around the 1.07 support. The
resistance at 1.0760 stalled the rally after some Fed members hinted to a pause
in June. The selloff that came soon after was caused by the NFP report, but as
we mentioned previously, it wasn’t such a great deal and the EURUSD restarted
its rangebound price action.
EURUSD Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that we
have a little box here where the EURUSD got stuck since the start of the week.
A breakout on either side may trigger some big moves but the levels to watch
should be the 1.0760 resistance and the 1.0635 support. If the buyers manage to
break above the resistance, then we may see the rally extending towards the 1.0845
level. On the other hand, if the sellers manage to break below the support, we
should see EURUSD trading at 1.0533 soon after.
The US Jobless Claims
report is the event to keep an eye on today in terms of risks, but its impact on the
market is not expected to be significant unless there are major deviations from
the expected number:
- If
there is a significant beat in the report, it could trigger some hawkish
expectations from the market as inflation may remain stuck at a higher level
due to a tight labour market. - Conversely,
if there is a significant miss in the report, the market should validate the
Fed’s neutral stance and, barring a hot CPI, may even price in the end of the
hiking cycle.
This article was written by ForexLive at www.forexlive.com.