The USD’s run that started yesterday morning got extended into the NFP report
Non-farm payrolls increased by 1.763 mln in August
EURUSD remains sold on rallies testing yesterday’s lows around the 1.1818 area
The US dollar has been trading higher against all of its major counterparts since the start of the trading day. The EURUSD & the GBPUSD pairs marked new daily lows after a strong jobs report from the US clocked in at +1,763 million jobs for the month of July. As of writing, the rally appears to be fizzling out.
Friday is a factor, so any retracements are possible (if not plausible), however, from a fundamental point of view the US dollar could hold its ground for the time being. After yesterday the euro tested the 1.1900 area for a third time only to get rejected, today USD bulls have been in charge into the non-farm payrolls report for July.
Private sector employers added 1.462 million jobs to their payrolls last month, a figure which was remarkably close to the average expectations from analysts for 1.474 mln. Unsurprisingly, average hourly earnings before the expiration of the government-sponsored unemployment benefits at the end of July remained underpinned at +4.8% (compared to expectations for +4.1%).
As of writing, profit taking on long US dollar positions appears to have concluded and the USD is bid once again. A sustained break below the 1.0800 level in the EURUSD pair is likely to trigger further stops below the figure which puts the double bottom at 1.1700 back in play. A rally back above the 1.0850 area could trigger further profit taking for another go at 1.1900.
The GBPUSD pair is also offered, with bids in the 1.3050-70 area limiting the downside so far. A break below would target the 1.2980-1.3000 area where cable buyers have marked a floor earlier this week. Only a rally back above the 1.3110-20 area would negate the move lower and aim at stops above 1.3030.
The USDJPY pair rallied strongly after the NFP report only to encounter offers at Wednesday’s high at 105.87. The level is proving to be difficult to overcome by USD bulls as the JPY remains mildly supported by a risk-off sentiment driven by a tepid US stocks open.
Commodity currencies are sold off across the board amid an increasingly tense relationship between the US and China. Overnight US President Donald Trump signed executive orders to ban transactions with Tik Tok’s parent company, ByteDance and Tencent’s WeChat.
Fundamental News
The US President’s Working Group on Financial Markets also surprised markets last night with a recommendation to commit Chinese companies listed in the US to local accounting standards. Trump’s team recommended that firms which don’t commit to using US rules should face delistings.
In another escalation of geopolitical tensions, the US is set to impose sanctions on Hong Kong’s Chief Executive Carrie Lam and other senior government officials which include CCP officials and some company executives.
The US unemployment rate dropped to 10.2% from 11.1% for the month of June as employees continued to go back to work in a post-lockdown environment. Further returns to normal conditions are contingent on moderation in COVID-19 case counts across numerous states, a debated school reopening, and a pickup in manufacturing and homebuilding, two sectors which underperformed this month.
Stimulus negotiations in Congress have not been finalised and the White House is considering executive action on various fronts. US President Trump tweeted that he is considering to move unilaterally on a prospective payroll tax cut, eviction protections, unemployment extensions, and student loan extensions.
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