European banks are still out on holiday today, but most major markets are open and today’s reaction to Friday’s disappointing US jobs report shows that the market is pricing in a lower probability of a Fed rate hike in Q3: the dollar is holding near Friday’s lows, US stocks are pulling back over half a percent, US 10yr bond yields are still subdued at 1.85%, and gold is surging by 20 points to 1220.
Interestingly though, today’s ISM Non-Manufacturing PMI report suggests that the NFP report may have overstated the weakness in the US labor market. The headline PMI report came out roughly in-line with expectations at 56.5, while the employment component remained relatively robust at 56.4; given the decent performance of this labor market indicator, we could see this month’s disappointing NFP report revised higher as we move through Q2.
Technical View: EURUSD
Coming out of Easter weekend, it’s apropos that EURUSD is on the verge of its own revival. After shedding over 3500 pips in less than a year, the world’s most widely-traded currency pair is seeing its largest rally since topping above 1.40. More to the point, the unit is on the verge of breaking above its 50-day MA and putting in its first meaningful higher high in eleven months.
For technical traders, the key level to watch this week is 1.1050, which represents the March high and the 50-day MA. If EURUSD can break above that key barrier, a more substantial rally toward the 23.6% Fibonacci retracement of the entire collapse off 1.40 at 1.1300 could materialize as we move through April. Astute traders will note that the clear bullish divergences in both the MACD and RSI support this view. On the other hand, only a break back below last week’s low around 1.0700 would reinvigorate the downtrend, indicating that the bias is relatively neutral between 1.0700 and 1.1050.
Key Economic Data / News that May Impact EURUSD This Week (all times GMT):
- Tuesday: European Service PMI reports (7:00-8:00 GMT), Eurozone PPI (9:00), US JOLTS Job Openings (14:00)
- Wednesday: German Factory Orders (6:00), Eurozone Retail Sales (9:00), FOMC Meeting Minutes (18:00)
- Thursday: US Initial Unemployment Claims (12:30)
- Friday: No meaningful economic data