London 05/08/2022

The major event of the current week took place a few hours ago and it was the jobs market in the US. The new job positions (NFPs) in July surprised the markets as the expected value was 250K and the announcement was significantly higher, at 528K. The immediate reaction of the markets was the impressive recovery of the US dollar and the drop in the stock indices. Markets anticipate that the US economy is in very good shape and this is critical enough, given that recession fears dominate globally. There are certain reasons for extra concern after the latest conflict between US and China after Pelosi visited Taiwan but the markets have no serious worries so far.
All the major indices today are bearish, following the US NFPs announcement and the strengthening of the US dollar caused a sharp drop in gold prices as well. For the first time since last February, oil fell below $90 as the recession fears may cause a lack of demand. Finally, the bond yields are recovering this week as the US 10-year bond yield started from 2.66% and it is currently moving at 2.81%.
EURUSD (current price at 1.0158) turned bearish after the NFPs announcement today, following the dollar’s strength. Europe had negative retail sales in June but the main issue is the energy crisis that threatens citizens and companies with a tough winter with a high probability of recession. If the EURUSD drops below 1.01 then the parity (1:1) scenario earns a lot of credits and the pair returns to its long-term strong downtrend.
GBPUSD (current price at 1.2010) is heavily bearish this week because of the dollar’s strength after NFPs and because the sterling became weaker after yesterday’s decision on interest rates by the Bank of England. There was a 0.50% interest rate hike which was the estimated action by the markets and since there was a hidden hope for something more, the result caused the sterling’s weakness. Moreover, the outlook of the UK economy as it was presented by Andrew Bailey (head of BoE) is a scary movie as it predicts inflation of 13% and recession for at least 5 quarters. Below 1.20 the downtrend becomes stronger.
USDJPY (current price at 134.87) is bullish this week, recovering significantly from the weekly low price of 130.50. The strength of the dollar, especially after NFPs and the recovery of the bond yields, helped the pair to perform a bullish week after two consecutive weeks of strong downward trends. Since Japan had no important announcements this week and since the loose monetary policy from the Bank of Japan carries on, the dollar is the current dominator of the pair. The next resistance for the buyers is the price area of 137.

DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

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