Weak Dollar and Strong Markets after the unexpected Nonfarm Payrolls


At the weekend Mexico and the United States announced the deal on a trade and migration. This news triggered a 2% spike in the Mexican peso to 19.13 at one point, to levels that preceded the sudden announcement of the imminent introduction of tariffs on Mexican imports. Positive news from the trading front supported the growth of the markets at the start of the week. However, another front — the Chinese — cannot yet boast such a success. The Chinese yuan updates the lows of the year, reaching 6.96 at the end of last week and staying at 6.95 on Monday morning. Now all investors' attention again turned to disputes between China and the United States, and markets are hoping for a breakthrough in negotiations after Trump and Xi Jinping meet on the G20 (June 28-29).

Stocks

Stocks are rising at the start of trading on Monday. Purchases are supported by a number of factors, from expectations of the world central banks softening of the policies and trade negotiations to investor interest in stocks after the sale in May. The technical picture on SPX is still in favour of the bulls: the index received support after falling below the 200-day moving average. The index is once again enjoying a growth momentum on the news of the US and Mexico deal after closing Friday above MA50. In addition, Friday's labour market data in the US only increased the pressure on the dollar and spurred speculation about the Fed’s imminent cut of interest rates.

SPX

 

EURUSD

Extremely weak payrolls in the United States (an increase by just 75K against the expected 180K) increased expectations that the Fed will cut rates as early as in June. At the same time, on the eve, the position of the ECB was regarded by investors as less dovish, which caused the strengthening of EURUSD. The pair trades around 1.1300 at the start of trading on Monday after touching 1.1340 on Friday. The pair has already confirmed the breakdown of the downward trend and tried to break through the significant resistance at 1.1300. The next test for the pair may be the level of the 200-day moving average at 1.1369. The intersection of this line is often accompanied by the joining of big capital to the trend, forming a tendency for several months. In this case, EURUSD is quite capable of turning to growth in the region of 1.1500 (round level near the highs of the year) or higher - 1.1700, where there was consolidation in Q3 2018.

EURUSD

 

Gold

The weakening of the dollar at the end of last week supported gold. As a result, the price of this metal has updated the annual highs at 1348. Nevertheless, the Friday impulse looks more like the final chord of the previous rally. Gold attracted buyers at the end of May due to the global flight from risky assets and sales on stock exchanges. But at the beginning of June, stocks were actively growing, launching a wave of profit-taking on gold. In the coming days, it will not be surprising to see a decline in the precious metal that has lost its main growth driver.

GOLD

 

USD/CNY

Chinese yuan updates the minimum of the year against the US currency. This price dynamic is clearly out of the general direction of the markets where the dollar retreated last week. USDCNY stabilized at the end of last month, but spiked on Friday, touching 6.96. The last time we saw such high levels at the end of last year, when investors were selling the yuan, pricing in a quick increase in tariffs for Chinese goods. It is important that this was on the eve of the meeting of Trump and Xi in Buenos Aires, after which a truce was announced. Markets returned the yuan to the same point. The weakening of the Chinese currency should not be liked either by China (as it provokes the outflow from financial markets), or the USA (as it increases the competitiveness of local goods). It is possible that the weakening of the yuan will be a sufficient impetus for both sides to soften the mutual rhetoric in the trade disputes that have been going on for more than a year.

USDCNH

 

FxPro UK Limited is authorised and regulated by the Financial Services Authority, registration number 509956. CFDs are leveraged products that incur a high level of risk and it is possible to lose all your capital invested. Please ensure that you understand the risks involved and seek independent advice if necessary.

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without the prior permission of FxPro. Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary. FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07) and FxPro UK Limited is authorised and regulated by the Financial Services Authority, Number 509956.

Feed news

Latest Forex Analysis

Editors’ Picks

EUR/USD: Bearish outside day as Fed tempers aggressive rate cut expectations

Tuesday’s bearish outside day makes today’s close pivotal. Fed officials pushed back on aggressive rate cut calls, pushing the USD higher. An above-forecast US durable goods data could yield a bearish daily close. 

EUR/USD News

GBP/USD offers fewer moves ahead of Carney’s speech

Having reversed from the 50-day SMA, mainly because of renewed Brexit fears and sluggish data from the UK’s CB retail sales survey, the GBP/USD pair trades modestly flat near 1.2685 ahead of the London open.

GBP/USD News

USD/JPY: Bulls back in charge, re-takes 107.50

The less dovish rhetoric from a selection of Fed speakers overnight continues to aid the post-FOMC US dollar recovery, prompting the USD/JPY pair to retest the midpoint of the 107 handle despite negative Asian equities. 

USD/JPY News

Conference Board Consumer Confidence: The China syndrome

The index declined to 121.5 in June from April’s revised 131.3. A much more modest drop to 131.2 had been predicted.  “The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence,” wrote Lynn Franco.

Read more

Gold: 100-HMA triggers the U-turn towards $1421?

Gold is on a run towards near-term horizontal-resistance following its U-turn from the 100-hour moving average (HMA) ticks it up to $1407.80 ahead of the European open on Wednesday.

Gold News

Majors

Cryptocurrencies

Signatures