Due to less liquidity the markets became increasingly volatile and financial instruments reflected data published in the US by wide movements. Even if the Unemployment Claims beat expectations by 282k and the CB Consumer Confidence rose to 101.3 points, the Non-Farm Employment Change decreased to 126k, the weakest report in a year. The market reaction was significant, with EURUSD going up to 1.1026, stock market indexes testing out local support areas, basically the dollar losing ground against all its counterparts.
However, beyond this news that caught the market participants eyes, unemployment is at 5.5%, the minimum for the last 5 years and average earnings advanced 0.3%. Sooner or later, the US dollar will recover the decline, and might even earn additional ground, when the markets will realize that the fall in jobs may be a temporary effect of the slowdown of oil industry together with hotels and entertainment sectors.
Today, the Canadian and Japanese markets will open, so the volatility could calm down, but it would be wise to still not expect normal market conditions. The Spanish Unemployment Change will be released today for the euro, while in the United States the ISM Non-Manufacturing PMI and the FOMC Member Dudley’s speech may reposition the dollar.
In Athens the situation is heating up as it needs to pay off 450 million euro loan to the IMF due this Thursday. Greek officials tried to improve the overall image promising that Greece “intends to meet all obligations to all its creditors, ad infinitum” while interior minister suggested that the government would prioritize wages and pensions over the IMF payment. The reality is that a Grexit situation odds are exceeding the 50% threshold.
The oil quotations are increasing as Saudi Arabia raised prices for sales to Asia and the potential Iran deal is seen to have an impact on the price of oil later in the summer, when the Teheran’s restrictions will be clarified.
On Tuesday we may pay attention to the Australian dollar evolution as the Cash Rate is due to be published. Even if weaker economic conditions are pushing the central bank toward an interest rate decrease, this decision may occur with a delay. Most probably, if the RBA maintains the rate, AUDUSD could bounce from the 0.7570 support and develop a correction.
The GBPUSD currency pair left the boundaries of the descending channel and is currently developing between the 1.4922 resistance and 1.4889 support levels. The Services PMI is due to be published on Tuesday while the Official Bank Rate together with the MPC Rate Statement will be released on Thursday. GBPUSD may be tempted to test the 1.4800 support zone.
