On Friday morning, prices fell again (to 160.48), and the overnight correction attempt (to 161.51) was quickly extinguished. There are voices that the Japanese may use today’s low liquidity for further actions, similar to the Sunday to Monday trade. Key support for USDJPY is around 158.50.
On Friday morning the dollar is generally weaker on the broad market, continuing the weakening resulting from disappointing Labor Department data from yesterday - NFP showed only 57 thousand jobs in June, and earlier readings were revised down (May to 129 thousand from 172 thousand). For markets this signals that expectations about the scale of Fed rate hikes may have been excessive – nevertheless one move in the fall remains priced. Key in this regard may only become apparent with CPI inflation data for June, which we will know on July 14.
Today among the strongest currencies are the Antipodes, led by the New Zealand dollar, which is not surprising – next week, on July 8 the RBNZ will most likely raise rates by 25 basis points. and will sustain the “hawkish” narrative of the need for further tightening. Just behind us are today the Scandinavian crowns, which may also result from better sentiment in markets – although yesterday on Wall Street there was still visible capital rotation manifesting in reduced semiconductor exposure, today early strong rebound of the KOSPI index in South Korea may suggest that this short‑term sell‑off has ended. Investors in equity markets should keep in mind that in two weeks the US will start the Q2 earnings season, while the previous was remarkable in this regard.
In commodity markets attention is drawn to continued upward movement in precious metals – the gold contract tested today around 4200 USD – influenced by a weak dollar and falling expectations of clear central bank moves on rates. The oil slightly rebounds – although negotiations continue, Iran "instructed" carriers using the Strait of Hormuz to use only routes designated by the army.
In the macro calendar today will attract attention final PMI readings for services for May. Attention is drawn to the retreat of this indicator for China, although smaller than forecasts (to 54.1 points from 54.4). Ahead of us are eurozone data, which should be better than May (initial estimates noted a rebound to 48.9 points). The reverse may await us in the UK, where a retreat to 48.7 points from 49.3 is possible.
EURUSD – will there be an attempt to approach 1.16?
Yesterday the EURUSD pair rose to around 1.1472, although the daily candle ended at 1.1432. Nevertheless the key level 1.1442 was breached, so it is no surprise that today the upward maneuver is repeated. The daily indicator setup supports this scenario, but fundamentals are key. Weaker labor market data will affect falling expectations of a more aggressive Fed approach to rates, and before the CPI data release in mid‑July market emotions will likely rise further.
Thus expectations that EURUSD will erase the entire move triggered by the “hawkish” Fed approach during the June meeting may be reasonable – this would mean a return to around 1.16 within a few weeks.
Daily EURUSD chart
