EUR/USD, GBP/USD extend NFP losses, focus now on ISM, Fed and BOE

Article By: ,  Market Analyst

Asian Indices:

  • Australia's ASX 200 index fell by -75.9 points (-0.99%) and currently trades at 7,623.50
  • Japan's Nikkei 225 index has risen by 193.31 points (0.53%) and currently trades at 36,352.95
  • Hong Kong's Hang Seng index has fallen by -23.14 points (-0.15%) and currently trades at 15,510.42
  • China's A50 Index has risen by 127.41 points (1.16%) and currently trades at 11,071.24

 

UK and European indices:

  • UK's FTSE 100 futures are currently up 7.5 points (0.1%), the cash market is currently estimated to open at 7,623.04
  • Euro STOXX 50 futures are currently down -7 points (-0.15%), the cash market is currently estimated to open at 4,647.55
  • Germany's DAX futures are currently down -42 points (-0.25%), the cash market is currently estimated to open at 16,876.21

 

US index futures:

  • DJI futures are currently down -88 points (-0.23%)
  • S&P 500 futures are currently down -13.25 points (-0.27%)
  • Nasdaq 100 futures are currently down -51.5 points (-0.29%)

 

 

Jerome Powell said it would be “prudent” to give it more time to see if inflation is moving towards their 2% in a sustainable way. Translated, it means the Fed do not appear to have appetite for more than the three cuts the median estimate for the dot plot shows this year. It should also be noted that the pre-recorded interview with 60 minutes took place after the FOMC’s latest meeting and ahead of Friday’s blowout jobs report.

The ISM services report is released today, which fell a little too close to 50 for its own good last month. The employment sub index also fell at its fastest pace since the pandemic, which is at odds with Friday's NFP report. If it were to cross beneath 50 to denote contraction and is coupled with slower ‘new orders’ and ‘prices paid’, it could further weaken the US dollar and bolster gold prices on bets that the Fed will begin cutting rates in May. But if it contracts too fast and prices and new orders also tank, the recession alarm bill could ring and stock markets might actually see bad news as ‘bad’, for the first time in a while.

Fed Atlanta President Raphael Bostic speaks ahead of the NY close on Monday, and he's unlikely to strike an overly dovish tone given he recently reiterated that cuts won't begin until Q3. So that could spur some US dollar strength and weigh on gold.

 

'

 

Events in focus (GMT):

  • 08:55 – German final PMIs
  • 09:00 – Eurozone final PMIs
  • 09:30 – UK final PMIs
  • 10:00 – Eurozone producer prices
  • 14:45 – S&P global US final PMIs
  • 15:00 – ISM services PMIs
  • 17:30 – BOE chief economic Pill speaks
  • 19:00 – FOMC member Bostic speaks

 

 

 

 

GBP/USD technical analysis (daily chart):

The daily chart shows that GBP/USD has effectively ranged between 1.260 and 1.280 over the past eight weeks. A prominent bearish engulfing candle formed on Friday thanks to the strong NFP report, and whilst it has extended Friday’s losses during Monday’s Asian trade, it appears reluctant to break 1.26 with any conviction for now.

It might be down to the ISM services report or comments from either BOE’s Pill or Fed’s Bostic as to which side of 1.26 is closes, but whilst prices remain above 1.26 then the bias is for some mean reversion to the centre of the range. A break beneath 1.26 opens up a run for 1.25, near the monthly S1 pivot point.

 

EUR/USD technical analysis (1-hour chart):

EUR/USD finds itself at a fresh YTD low ahead of the European open, but I don't trust these Monday Asian moves; USD is stronger, but the 'follow-through' pales in comparison to Friday's moves. Hence the bias for a countertrend bounce for EUR/USD and GBP/USD. 

The 1-hour RSI is oversold and a small bullish hammer has formed. Note the heavy selling around the highs on Friday, so if prices are to recover and break above 1.08 it could force bears to capitulate and trigger a deeper countertrend bounce. Should prices continue to fall, the December low makes a likely support level given the milestone level sits around the monthly S2 pivot.

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the market you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024