All eyes on market moving U.S. jobs report Last week, the U.S. Dollar extended its winning streak against other major currencies that started in the previous week, triggered by Fed Chairman Ben Bernanke’s comments. The rally helped the U.S. Dollar Index to trim most of its losses for the month of June. Markets will now focus on the biggest economic news of the month, monthly jobs report from the U.S., for further clarity on the conditions of the U.S. labor market and to get cues of where the U.S. economy is headed. U.S. Jobs Report – Labor market conditions would play a vital role in the Fed’s decision to reduce the pace of its monthly asset purchases of $85 billion and hence monthly employment report for June will remain the spotlight of this week’s economic data from the U.S. The Labor Department’s Non-farm payrolls report for June, scheduled for release on Friday, is expected to show an addition of 162,000 jobs in June, down from 175,000 in May. Meanwhile, the unemployment rate for June is seen ticking down 0.1% to 7.5% from 7.6% in May. Any positive surprise from the jobs report would support the belief that the Fed will move to slow its asset purchases program later this year and is likely to be backed by further bullish momentum for the U.S. Dollar. The upcoming week’s U.S. economic calendar also highlights ISM Purchasing Managers’ Index (PMI). ISM PMI Data – This week’s U.S. economic calendar starts with ISM Manufacturing PMI, scheduled for release on Monday. The U.S. manufacturing activity has been declining for the past three months and the manufacturing index for May slipped below the 50 mark, indicating contraction, for the first time in 2013. Despite the recent slowdown in U.S. manufacturing activity, the ISM manufacturing index for June is now forecast to rebound and show a reading of 50.6. Meanwhile, the ISM Non-manufacturing (Services) PMI, scheduled for release on Wednesday, is expected to show a continuing expansion in the services sector and the June reading is projected to improve further to 54.3 from 53.7 registered in May. Other important economic data from the U.S. this week include ADP report that shows the number of private jobs created during June month along with the monthly U.S. Trade data for the month of May, both scheduled for release on Wednesday. The U.S. trade deficit is expected to remain steady at $40.3 billion for the month of May. Major Central Banks in focus A series of central bank policy meeting is also on the list of market catalysts this week. Along with the critical monthly U.S. employment report, market will also be looking for central bank rate decisions from Australia, U.K. and Euro-zone. A busy week of major central bank policy meetings kicks off with the Reserve Bank of Australia (RBA) interest rate decision on Tuesday. The RBA is widely expected to leave its key benchmark interest rate unchanged at 2.75%. Should the Australian central bank show willingness to further lower the cash rate, the Australian Dollar is likely to witness renewed weakness in the coming weeks. A very strong horizontal resistance for AUDUSD is pegged near 0.9400 – 0.9420 zone marked Nov. 2007, Nov. 2009, April 2010 highs and Oct. 2012 low. On the downside 0.9140 zone seems to act as a very important support for AUDUSD. Should the pair now decisively break and close below 0.9140 zone, the pair might continue to remain in a strong downtrend and could depreciate towards 0.8840 – 0.8830 horizontal support zone. Also read: AUDUSD – Technical Outlook The week’s agenda also includes interest rate decisions by the European Central Bank (ECB) on Thursday. Although, ECB isn’t expected to move on the interest rate, markets’ main focus would be on the Press Conference, scheduled later on Thursday after the rate decision announcement, where ECB President Mario Draghi’s comments on the state of the economy could have significant effect on the Euro. Immediate downside support for EURUSD is seen near 1.2980 – 1.2970 zone followed by a minor support near 1.2940 area. A decisive break below 1.2980 – 1.2970 and failure to hold support near 1.2940 might trigger further weakness for EURUSD towards 1.2850 area. On the upside 1.3090 – 1.3110 area seems to provide immediate strong resistance for EURUSD. Decisively conquering 1.3100 resistance seems to accelerate the bullish momentum towards 1.3160 – 1.3180 zone. Also read: EURUSD – Technical Outlook Also on Thursday, the Bank of England (BoE) is scheduled to announce its latest monetary policy decision. The BoE is expected to keep its key interest rates and asset purchase program, that currently stands at 375 billion pounds, unchanged. The new BoE Governor, Mark Carney, is expected to offer some future guidance regarding the central bank’s monetary policy action. Any dovish policy outlook is likely to trigger renewed weakness for the British Pound in the coming weeks. On the upside, 100-day SMA area near 1.5300 – 1.5330 zone seems to act as immediate strong hurdle for GBPUSD. A decisive break and close below 1.5200 – 1.5190 zone, immediate support on the downside, could trigger further weakness for GBPUSD to test sub 1.5100 levels. This week’s U.S. jobs report and major central bank decisions would certainly trigger some choppiness and infuse additional volatility in the currency markets. Haresh Menghani Senior Market Analyst Admiral Markets
Posted on: Wed, 03 Jul 2013 08:20:51 +0000
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