EURUSD has been in a free-fall lately as traders see Europe as a potential epicentre for a recession and as the ECB cannot easily hike the rates. The third-biggest bond market in Europe, Italy, wouldn’t survive if it had to pay market rates for its financing. The market is however deeply oversold which could create upside volatility should any reasons for dollar weakness emerge. In this report, I provide you with updates on some of the markets we’ve followed lately and also give you key price levels for trading the EURUSD and USOIL for the NFP volatility. Plus, we have a speech from ECB President Lagarde too on the schedule for today. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
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USOIL – I suggested yesterday that the nearest resistance levels at 101.14 and 103.08 could come into play and here we are. The market rallied to 101.14 and quite started to attract sellers but not yet decisively. The fact is that the market is now facing a significant sideways formation which could make it challenging for the bulls to keep advancing. The key price levels for intraday trading today are 93.08, 96.50, 99.29, 101.86 and 105.56.
EURUSD keeps on drifting lower as traders see Europe as a potential epicenter for a recession and as the ECB cannot easily hike the rates. The third-biggest bond market in Europe, Italy, wouldn’t survive if it had to pay market rates for its financing. The market is however deeply oversold which could create upside volatility should any reasons for dollar weakness emerge. Here are the key levels for trading the NFP today: 1.0071, 1.0144, 1.0191 and the 1.0220 – 1.0235 range.
NZDCHF is still trying to push higher towards my T2 level at 0.6046. The latest key support level is at 0.5984 and the market stays bullish as long as it trades above the 0.5946 support. Below this level it probably moves back down to 0.5920 or so.
CADCHF has broken out of the bottoming formation now. I said that a decisive break could take the market all the way up to 0.7626 but let’s have another target also. My T1 is at 0.7562 while the 0.7626 is my T2. Alternative scenario: The market breaks below back inside the bottoming formation and drifts down to 0.7420.
Macro Drivers for the USD
As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.
|The Federal Reserve||Fed hiked by 0.75% in June and indicated that there will steady rate hikes until the end of the year.|
|Stimulus||The Fed is looking to scale down its bond-buying program (QE) but has signalled that it be careful with tightening due to the war in Europe.|
|Yields||The US 10-year treasury yield has been rising strongly over the last two weeks as investors sell their bond holdings.|
|Employment||The May non-farm payrolls increased by 390K (436K previous) while the participation rate was confirmed at 62.3% (62.2% previous). The unemployment rate remained unchanged at 3.6%.|
|Inflation||The US annual inflation growth for May accelerated to 8.6%. This was the highest reading since 1981. Analyst consensus had expected the yearly rate to be 8.3%. The prices for energy (+34.6%) and food (+10.1%) made record increases. For food, this was the first increase of 10% or more since March 1981.|
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The Next Main Risk Events
- EUR ECB President Lagarde Speaks
- CAD Employment Change
- CAD Unemployment Rate
- USD Average Hourly Earnings m/m
- USD Non-Farm Employment Change
- USD Unemployment Rate
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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