London 03/06/2022
During this week, the US dollar had some mild profits and it could have performed more but yesterday was a bearish day due to the negative economic news that was announced. More specifically, the ADP employment change was announced at 182K, well below the 300K that the markets expected. Another factor was the slight decline of the bond yields but since the US 10-year bond yield performs profits this week, it helps the dollar’s performance as well.
A few hours ago, the Non-Farm Payrolls announced in the US at 390K vs 325K that markets expected and this fact has helped the dollar to recover a bit more but not to a degree that will change the weekly picture.
In Europe, the outlook is negative since the producer price index in the Eurozone was announced yesterday at 37.2% and the retail sales at 3.9%, below the 5.4% that the markets expected. Eurozone’s PMIs missed the targets as well.
There were some statements from Fed counterparts regarding the monetary policy, the interest rates, and the inflation. According to these statements, the inflation has not peaked yet and the interest rate hikes will continue until the end of the year.
EURUSD (current price at 1.0710) seems that it has found a new equilibrium price level around 1.07 and it’s mildly bearish this week. The come-back of the dollar combined with the negative news from the Eurozone have stopped the pair from performing a third strongly bullish week in a row. Even the upcoming interest rate hike from the ECB most likely in July seems to be digested by the markets although there’s still the question if the hike will be 0.25% or 0.50%. Needless to repeat that the Ukrainian war hits the European continent more than any other place on earth. In case of further dollar strengthening, the pair may move lower and below 1.0620, and the long-term downtrend of the EURUSD since last May may establish again.
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GBPUSD (current price at 1.2545) is bearish this week, following the strength of the US dollar that has developed during the last few days. The solid NFP results that were announced earlier have helped the dollar even more and at the same time, we must have in mind that there were no important economic announcements for the UK this week. The fears for a recession are still there as well as the scary movie case of two-digit inflation. Below 1.2458 which is the current week’s lowest price, we may have an acceleration of the downtrend, thinking that the milestone price of 1.25 would be broken out too.
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USDJPY (current price at 130.52) is above 130 again after 16 days of a downtrend that led the pair to the price area of 126.35. The latest strengthening of the US dollar as well as the rising bond yields have helped the pair to recover significantly. Only on Tuesday, there was some news concerning the Japanese economy: the unemployment rate at 2.5% vs 2.6% expected, the industrial production at -4.8% vs -2.5% expected, and the retail trade at 2.9% vs 2.6% expected. All these give a mixed picture so they were ignored by the markets. As long as the USDJPY stands above 130, the probability of reaching the multi-year (April of 2022 was the last time) high price above 131.25 is very high.
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