Market Focus on US Employment Report

The US employment report for July, will be released today at 12:30 (GMT).

The Non-Farm Payrolls figure is expected at 190k while previous figure was 213k. The unemployment rate is expected at 3.9% while previous reading was 4.0%.

The average earnings growth rate is expected to remain unchanged at +2.7% yoy.

Overall, if actual figures meet the forecast the indicators show a rather tight labor market, however it should be noted that the drop of the NFP figure blurs the whole picture a bit.

A strong employment report could support the USD, however note that the greenback is strengthening since yesterday on trade war issues.

EUR/USD dropped yesterday breaking the 1.1640 (R1) support line (now turned to resistance).

As the pair broke the lower boundary of its sideways motion, we lift our sideways bias in favor of a bearish market.

We could see the pair continue to trade in a bearish market as the US employment report could strengthen the USD side.

Technically, the downward trend-line incepted since the 31st of July supports the notion of a bearish movement for the pair.

On the other hand, the RSI indicator is approaching the reading of 30 in the 4 hour chart, implying an overcrowded short position.

Should the pair continue to be under selling interest we could see the pair breaking the 1.1580 (S1) support line and aim if not break the 1.1510 (S2) support barrier.

On the other hand should the pair find extensive buying orders along its path we could see the pair aiming if not breaking the 1.1640 (R1) resistance line.

BoE hikes, but pound drops on dovish comments

BoE hiked rates as expected yesterday reaching the +0.75% level, in a surprise unanimous 9-0 vote.

The hike temporarily strengthened the pound and especially the 9-0 vote count, as it showed the bank’s decisiveness for the rate hike.

However, in the press conference later, dovish comments made by BoE governor Carney weakened the sterling substantially.

The comments included remarks such as that the monetary policy would “need to walk not run” and the repercussions of a hard Brexit.

The pound may continue to ride a bearish wave today, at the aftermath of the comments made and as the Services PMI for July is forecasted to drop to 54.7 compared to previous reading of 55.1.

Cable dropped yesterday breaking consecutively the 1.3090 (R2) and the 1.3035 (R1) support lines (now turned to resistance) and stabilised later on.

We could see the pair continue to trade in a bearish market as the USD side of the pair could be supported by the release of the US employment report.

Should the bears continue to rule the pair’s direction we could see it aiming if not breaking the 1.2960 (S1) support line.

Should the bulls be in the driver’s seat we could see the pair breaking the 1.3035 (R1) resistance line and aim the 1.3090 (R2) resistance hurdle.

In today’s other economic highlights:

In the European session we get UK’s Services PMI for July and Eurozone’s retail sales growth rate for June.

In the American session we get Canada’s Trade Balance figure fir June and form the US the Trade Balance figure for June, the ISM Non-Manufacturing PMI for July and the Baker Hughes oil rig count figure.

As for the week ahead please refer to our next week’s outlook to be released later today.