DOLLAR STRENGTHENS AFTER HAWKISH FED MINUTES REPORT
After falling for the best part of yesterday, the dollar strengthened against its major peers after the Fed released minutes from its June meeting. The minutes revealed how Fed officials remain upbeat about the US economy but cautious about the impacts of a trade war.
Today, the focus among traders will shift from yesterday’s Fed minutes to employment numbers for the month of June. Economists expect jobs numbers to continue showing improvements with a steady increase in the number of people employed. They expect the number of people employed in June to grow to 200,000 and unemployment to remain at 3.8%. The most closely watched numbers in the report will be on wages and participation rate. Average hourly earnings are expected to grow by 0.3% with the participation rate expected to remain at 62.7%.
Trade will also be in the spotlight. At midday today, the US tariffs on Chinese goods will kick-off. This will officially be the start of a trade war that experts believe will be prolonged and difficult for consumers. Chinese officials have promised to retaliate against these tariffs which target $34 billion of Chinese imports.
Canadian employment numbers will be in focus too. The numbers will come at the same time as those from the United States. Traders expect the Canadian economy to have added 24,000 jobs in June after disappointing job losses in May. The unemployment rate is expected to remain steady at 5.8% as is the participation rate of 65.3%. Later on, the Ivey PMI will be released and is expected to show improvements. The PMI will rise to 63.2 from May’s 62.5.
The EUR/USD pair lost its upward momentum after the hawkish statement from the Fed. The pair dropped a few pips from yesterday’s top of 1.1720. It is now trading at 1.1687. Today, the pair will likely see some major movements as the tariffs kick in and as the US releases employment numbers. Further downward movements will see the pair test the important support of 1.1670 as shown below. If the jobs numbers disappoint, the pair will likely move past yesterday’s high of 1.1720.
On Thursday last week, the USD/CAD pair declined from the weekly high of 1.3385 and reached a low of 1.3110. This week, the pair has traded in a sideways direction. This could change today as jobs numbers from the US is countered with the jobs numbers from Canada. In the likely event that a reversal happens today, traders should look at the 50% Fibonacci Retracement level 1.3250.
On Tuesday, the USD/JPY pair crossed the major support level of 110.89. Since then, the pair has moved lower and is currently trading at 110.63. This price is the 38.2% Fibonacci Retracement of the pair. Today’s jobs numbers from the US will likely cause major movements in the pair. A bearish report could see the price test the important support of 110.27. A better-than-expected jobs report will see the pair test yesterday’s high of 111.13.