General market theme
Limited price action in the major instruments we monitor in our daily report over the past 24 hours as investors are now turning their attention on the upcoming Non-Farm Payrolls report which we know is the most market-moving data report. Last month’s figures were surprisingly low casting doubts over the US economy’s progress but this month almost all the precursors point towards a healthy rebound in the number of jobs added. If this is the case and we also see a good wage growth rate then the dollar should reap the benefits of fresh demand as the euro and the pound are under threat from the political uncertainty that surrounds the UK and the Eurozone.
Price action highlights
The euro stayed above the 1.1050 level yesterday while capped below the 1.1100 area as well in a day when the single currency didn’t have much in terms of price action to show for. The euro is benefiting from the pound weakness but at the same time the uncertainty caused by the UK referendum and the developing banking crisis in Italy are leaving the euro exposed to further weakness. A bullish NFP report should send the currency towards its recent lows at least and a further extension should push the euro towards the 1.1000 area.
The cable was also bearish yesterday after its failed attempt to climb above the 1.3000 level over the past 24 hours. The currency remains weak and its outlook still looks grim as there is no reason for the pound to receive support from investors after the decision to leave the EU which has brought uncertainty forward for the UK currency. Should the dollar advance against the pound today our first area of focus would be the recent lows just above the 1.2800 figure.
Focus of the day
The Non-Farm Payrolls is the main course for the day ahead as the rest of the calendar holds tier-3 reports. The UK Trade Balance figures that will be released before the US employment report are likely to be disregarded by investors that will have their attention fixed to the labor market data that will be released after midday. Apart from the number of jobs added in the economy the wage growth rate is also important in order to assess the dollar’s outlook for the next months.
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