Last week the US Jobs report shocked the financial markets on Friday, missing expectations by a vast margin, sending the dollar lower against a range of currencies. The market, were expecting one million new jobs to be added to the economy fell suddenly as new jobs totalled just 266k in April, while March’s figure was lowered to 770k from a prior 916k.
Yesterday saw an all-time record high number of confirmed daily new coronavirus cases globally. The situation is especially bad in India, which is seeing explosive growth in infection and an exponential rise in case numbers to new highs, which is putting a heavy strain on the Indian health care system due to a shortage of oxygen. There are fears of mutations rising in India which would be resistant to current vaccines. Japan is about to declare a state of emergency in Tokyo as the Olympics approach and cases surge amidst a slow pace of vaccination.
The latest US inflation numbers will be closely watched this week, particularly after the US Treasury Secretary, and former Fed chair, Janet Yellen recommended earlier this week that ‘very modest’ rate increases could be needed if inflation starts to become a problem.
US retail sales are expected to pull back sharply from the 9.8% monthly figure in March as the government stimulus checks and a further re-opening of the economy sent spending sharply higher. Another beat this month – expectations are for a very modest 0.2% m/m increase – would continue to boost the USD and fuel sentiment in the US economy. Last, but not least, Michigan Consumer Sentiment, an index comparing current and future economic conditions, is released late Friday and is expected to continue its recovery from the April 24, 2020 low print of 71.8.
In Europe, with Tuesday’s release of the German ZEW economic sentiment index for May the most likely to move the markets. The consensus is for a small rise to 71.0 from April’s 70.7. Also, German and French final inflation figures for April are due Wednesday, as are Eurozone industrial production statistics for March. On Thursday, Swiss, French and German banks will be closed in observance of Ascension Day.
Major Currencies Performance and Signals
EUR/USD
Last week the Euro moved up substantially throughout the trading session on Friday after the NFP jobs number came out in the US, shockingly disappointing. We expect the bullish trend to continue.
FORECAST: BUY
Resistance: 1.2200, 1.2250, 1.2300
Support: 1.2150, 1.2100, 1.2050
GBP/USD
Same as the Euro, last Friday NFP figure impacted all major currencies. On the Cable the push tested the 1.4000 psychological price line but retreated. We expect the GBPUSD pair to range this week.
FORECAST: NEUTRAL
Resistance: 1.4000, 1.4050, 1.4100
Support: 1.3950, 1.3900, 1.3850
AUD/USD
AUD/USD rates are breaking higher out of recent consolidations, suggesting that near-term technical structure is bullish.
FORECAST: BUY
Resistance: 0.7850, 0.7900, 0.7950,
Support: 0.7800, 0.7750, 0.7700
USD/JPY
On Friday after the NFP Numbers, Wall Street rallied to record highs, partly reducing USDJPY bearish momentum. The USDJPY pair at risk of falling further, critical support at 107.90.
FORECAST: SELL
Resistance: 109.00, 109.50, 110.00
Support: 108.00, 107.50, 107.00
USD/CAD
The loonie dropped to its lowest level since September 2017, as the pair ended the week slightly above the 1.21 level. There is just one economic release in the upcoming week the Manufacturing Sales, Friday, 12:30. Canada’s weak job numbers last week are an indication that the recovery from Covid-19 is not nearly complete, and this could limit enthusiasm for the Canadian dollar.
FORECAST: NEUTRAL
Resistance: 1.2150, 1.2200, 1.2250
Support: 1.2100, 1.2050, 1.2000
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