EUR/USD magnetised towards 1.36 handle after US strong jobs report

EUR/USD

First up for today’s key risk events was the ECB rate decision which saw the central bank keep all of its key rates on hold as was widely expected and thus kept the pair in close proximity to the 1.3650 level. This was then followed by the US nonfarm payrolls report which revealed strong jobs growth in the US coming in at 288k vs. Exp. 215k (painting a similar picture to that of yesterday’s ADP report.) Furthermore, the fall in the US unemployment rate to 6.1% vs. Exp. 6.3% provided further for traction for the USD against EUR as the pair moved lower towards the 1.3600 handle. One of the key takeaways from the conference was that the ECB saying the total take up for the TLTRO programme could reach EUR 1trl vs. the EUR 400bln figure seen in June, a figure that would increase the ECB’s balance sheet by 50% to a total of approximately EUR 1trl. This added downward pressure on EUR, as EUR/GBP printed its lowest level since Oct’12. In terms of price action, EUR/USD then proceeded to be magnetised towards the 1.3600 handle where there was said to be a 2.2bln vanilla option expiry. Looking ahead, tomorrow is likely to be a sombre affair with the US away from market for Independence Day and a lack of tier 1 Eurozone data. 

GBP/USD

Following the recent slew of positive data from the UK, attention in the first half of trade for the pair was upon the UK services PMI number. This went against the grain of recent releases by coming in at 57.7 vs. Exp. 58.3. This saw a fast-money move lower in the pair by around 25 pips, taking the pair below 1.7150. The next source of direction for the pair stemmed from the US jobs report, which saw broad-based USD strength and thus initially placed the pair under some downside pressure, although this move to the downside was capped and partially pared alongside the move lower in EUR/GBP which saw GBP prosper against its US counterpart. Looking ahead, tomorrow sees an absence of tier 1 data from the UK or BoE speakers with volumes expected to be light in FX markets.

USD/JPY

During Asia Pacific trade USD/JPY moved higher after breaking above its 200DMA at 101.75 yesterday, underpinned by a better-than-expected US ADP figure. This was a move that continued throughout the early stages of European trade before resistance was met at the 21 and 50 DMAs (seen at 101.97 and 101.96 respectively). With this resistance firmly in place, all eyes were on the US jobs report which saw the pair break through these levels with the headline exceeding expectations and US unemployment level falling to 6.1%, leading participants to bring forward their Fed Fund rate rise forecast forward to June 2015 from July 2015. The jobs report consequently saw the pair breach the 102.00 level to the upside before running into offers at 102.20 cementing the pair’s gains, marking the pair’s best session since Mid-April.