EURUSD, H1
US ADP reported that private payrolls increased 219k in July, better than expected, following the 181k May gain (revised from 177k). Employment in the goods producing sector rose 42k, manufacturing was up 23k and construction increased 17k. Jobs in the service sector climbed 177k, with education/health adding 48k. This report suggests upside risk to out 210k nonfarm payroll gain.
The Dollar moved slightly higher after the better ADP jobs print and upward back revision, which could herald another firm July payrolls reading on Friday just as the Fed wraps up its meeting later today. USDJPY picked up at 111.90 highs and EURUSD a few points higher at 1.1699. Equity futures continue to indicate a mixed open, with techs leading after Apple’s earnings beat.
EURUSD has remained downwardly biased, earlier posting a 2-day low at 1.1672, extending the correction from yesterday’s 1.1746 peak. Prevailing levels are near the midway mark of a broadly sideways range that’s been evolving since early June. The dip today was largely driven by a broad, although moderate, bid in the Dollar. Eurozone July manufacturing PMI was confirmed at a 55.1 reading, unchanged from the flash estimate, and up on the June reading of 54.9, though both output and new orders remained subdued (painting a similar picture to other PMI reports today, such as from the UK and Japan).
Fed will conclude its 2-day FOMC policy meeting today, which should be a non-event for markets with no changes expected to policy and only minor changes likely on the statement compared to Fed’s June policy statement. The relative strength of the US economy and the Fed’s tightening course, which is expected to move into two more 25 bp hikes in the Fed funds rate this year, one in September and another in December, should keep the balance of directional risk toward the downside for EURUSD.
Meanwhile, markets are also facing 2 wildcards in Europe, which carry potential to disrupt the EU applecart; one stems from the evolving populist political landscape in Italy, and another is the palpable risk for there being a no-deal Brexit scenario.
EURUSD has breached Support at 1.1682-84, which is the 50 Fib. level set since last Friday, putting focus to Monday’s low at 1.1648 as a downside waypoint. Immediate Resistance comes at the round 1.1700, while next Resistance is at 1.1743-51, levels that encompass recent range highs.
Technically, hourly momentum indicators are endorsing the bearish weakness in the market. The RSI indicator is flattening and stands below the threshold of 50. The MACD oscillator is moving higher within the negative area, slightly above its signal line and is reaching the zero zone but with weak momentum so far.
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Andria Pichidi
Market Analyst
HotForex
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