Last week, trading on most of the majors closed up against the US dollar. The biggest winner was the pound (+2.03%), followed by the euro (+0.55%), the yen (+0.41%), the Swiss franc (+0.32%), and the Canadian dollar (+0.26%). The only currencies to lose out were the Kiwi and Aussie dollars, which shed 0.20% and 0.22% against the greenback respectively.
On Friday the 3rd of May, the euro bulls recovered all their losses to close the day up against the dollar. After the NFP report came out, the euro dropped to 1.1135. The US employment report exceeded expectations, with the number of new jobs increasing, and the unemployment rate decreasing.
The dollar erased all its gains as traders turned their attention towards the negative components of the report. The rise in wages was modest, while the workforce participation rate decreased.
263k new jobs were added to the US economy outside the agricultural sector in April against a forecast of 190k (predictions ranged from 120k to 250k). The readings for the two previous months were revised upwards by 16k. The unemployment rate dropped from 3.8% to 3.6%. The participation rate slid from 63.0% to 62.0%. Average hourly earnings rose by 0.2% against a forecasted rise of 0.3%, while the year-on-year value came out at 3.2% (previous reading: 3.3%).
Further pressure was heaped on the dollar by the ISM report. The ISM non-manufacturing PMI for April posted a value of 55.5, down from 56.1 in March (forecast: 57.0). I don’t think this report was of much interest to speculators following the NFP report. They took advantage of it to cash in on their long positions and open shorts. The EURUSD then rose to 1.1205.
Day’s news (GMT+3):
- 10:50 France: Markit services PMI (Apr).
- 10:55 Germany: Markit services PMI (Apr).
- 11:00 Eurozone: Markit services PMI (Apr).
- 11:30 Eurozone: Sentix investor confidence (May).
- 12:00 Eurozone: retail sales (Mar).
- 16:30 US: Fed’s Harker speech.
- 20:45 Canada: BoC Governor Poloz speech.
On Monday the 6th of May, trading opened with a sharp drop on the euro. The Forex market is in the red as a result of news concerning the US and China. The major currencies suffered a decline following a tweet from American journalist Edward Lawrence, saying that Chinese Vice Premier Lui He has cancelled his trip to Washington following a recent tweet from Trump threatening to increase tariffs on Chinese goods.
The euro recovered its overnight losses. Our pair is trading around 1.1192 against a low of 1.1170. In my forecast, I expect the pair to go against Friday’s rally with a decline to the 45th degree at 1.1152. If today’s low of 1.1170 isn’t surpassed, we can expect the pair to recover to 1.1260.