The US dollar remains generally within a bearish trend as the week ended after non-farm payrolls report miss sapped Fed tapering bets. If another surge in the Delta variant is seen in the US, it may reduce the US Dollar across all major currency crosses.
Even with plenty of headlines related to Covid-19, monetary and fiscal policy and incoming economic data, US Treasury yields have moved very little over the past month. The 10-year Treasury yield spent most of the month of August anchored around 1.30%, and despite a disappointing nonfarm payrolls number this morning, the 10-year yield is up a few basis points and currently sits at 1.33%.
While much of the West continues to fight with droughts and wildfires, Hurricane Ida dumped massive amounts of rainfall on large swathes of the East. The potential negative economic impacts extend to both the local and broader US economy.
In the EU, one after the other, hawkish members of the European Central Bank’s policymaking Governing Council came out last week warning that Eurozone monetary policy will need to be tightened.
However, it’s almost certain that they’ll be outvoted by the doves at this week’s Council meeting and that policy will remain just where it is, with no pre-announcement of a cut in asset purchases likely before the end of this year.
The most important events the coming week include the JOLTS job opening due on Wednesday ahead of Fed William’s speech in the US. Furthermore, the weekly unemployment claims are also significant to note. Other than that, US PPI m/m data may also trigger volatility due on Friday. The figure is expected to slide to 0.6% against the previous month’s reading at 1.0%.
Major Currencies Performance and Signals
EUR/USD
The euro rallied last week, due to the NFP numbers miss. This week the Euro is expected to continue its bullish momentum towards 1.1900 and then 1.2000.
FORECAST: BUY
Resistance: 1.1900, 1.1950, 1.2000
Support: 1.1850, 1.1800, 1.1750,
GBP/USD
The GBPUSD – like other pairs – saw the price move higher after the initial reaction to the US jobs report. The inability to extend above 1.3900 can lead to more downside trading, but there are other key obstacles needed to be cleared to the downside before the sellers can take back more control.
FORECAST: SELL
Resistance: 1.3900, 1.3950, 1.4000
Support: 1.3850, 1.3800, 1.3750,
AUD/USD
Hopes are growing that the nation will see GDP contract in Q3 after strict lockdowns across the country. That has brought forward bets that the RBA may reverse its conclusion to taper weekly asset purchases later this year. The Aussie looks like its going to be volatile next week within a range-bound channel.
FORECAST: NEUTRAL
Resistance: 0.7450, 0.7500, 0.7550
Support: 0.7400, 0.7350, 0.7300
USD/JPY
The US ADP and NFP figures reported a depressing scenario for the US dollar that helped the USDJPY bears. The Delta variant is increasing in the United States that may keep the Dollar under pressure.
FORECAST: SELL
Resistance: 110.00, 110.50, 111.00
Support: 109.50, 109.00, 108.50
USD/CAD
Weakness in the U.S. labour market and its implications for the Federal Reserve’s monetary policy support the case for further U.S. dollar weakness in the near term. The technical outlook is also slightly negative
FORECAST: SELL
Resistance: 1.2600, 1.2650, 1.2700
Support: 1.2500, 1.2450, 1.2400
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