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MTrading Team • 2024-02-02

EURUSD keeps bounce off seven-week low as US employment report looms

EURUSD keeps bounce off seven-week low as US employment report looms

Market sentiment remains firmer early Friday as traders await the all-important US job numbers for January. In doing so, the risk-takers cheer the US Dollar’s inability to benefit from the multi-month high activity data, as well as the downbeat Treasury bond yields.

That said, the US Dollar Index (DXY) posted the biggest daily loss in five weeks despite a 15-month high US ISM Manufacturing PMI. The reason could be linked to a four-day losing streak of the US 10-year and 30-year Treasury yields.

With this, the US Dollar’s fall allowed Gold prices to jump to a one-month high but the crude oil dropped to the lowest level in a week, mainly due to the hawkish Fed concerns and the demand woes emanating from China.

Additionally, EURUSD recovered from the lowest levels in seven weeks while GBPUSD bounced off a fortnight low. On the same line, AUDUSD took a U-turn from an 11-week low whereas NZDUSD and USDCAD struggled to cheer the Greenback’s weakness amid concerns about China and downbeat Oil prices.

Elsewhere, BTCUSD snapped a two-day losing streak and the ETHUSD also gained even as optimism in the crypto markets faded.

Following are the latest moves of the key assets:

  • Brent oil licks its wounds at the lowest levels in more than a week, mildly bid near $74.50 at the latest.
  • Gold price portrays a five-day uptrend around $2,056 by the press time, flirting with a one-month high of late.
  • USD Index stays pressured around 103.00 after falling the most in a month the previous day.
  • Wall Street closed with gains but the Asia-Pacific stocks drifted lower. That said, equities in the UK and Europe print minor gains during the initial hour.
  • BTCUSD and ETHUSD both posted minor gains near $43,000 and $2,310 by the press time.
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US Dollar traces downbeat yields ahead of NFP

The US Dollar and Treasury bond yields dropped the previous day despite upbeat US ISM Manufacturing PMI as early signals for today’s employment report showed signs of easing job growth. Also exerting downside pressure on the Greenback and the yields were concerns about the reduced US Treasury deficit and hopes of witnessing a “soft landing” in the US.

While the US Dollar and yields were declining, the Gold price benefited from the same and gained more upside momentum amid China’s readiness for more stimulus, as well as upbeat PMI data from the Dragon Nation. However, the Middle East tensions and the market’s reduced bets on the Fed’s early rate cuts put a floor under the USD and challenged the buyers of XAUUSD.

That said, the mixed prints of European inflation data and European Central Bank (ECB) officials’ rejections of early rate cuts joined the softer US Dollar to trigger a notable recovery in the EURUSD pair. On the same line, the GBPUSD ignored the Bank of England’s (BoE) status quo and rather concentrated on the policymakers’ mixed bias to post daily gains. Further, USDJPY tracked softer yields amid fresh talks of the Bank of Japan’s (BoJ) exit from the ultra-easy monetary policy whereas the AUDUSD and NZDUSD benefited from the risk-on mood. It’s worth observing, however, that the Oil prices failed to cheer the US Dollar’s gains and the supply-crunch fears.

  • Strong buy: USDCAD, USDJPY
  • Strong sell: Crude Oil, US Dollar, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

US employment report, Fed Chair Powell’s speech eyed…

Looking forward, the US employment numbers are likely to gain the spotlight while the Factory Orders for December and the weekend interview of Fed Chair Jerome Powell will also be important to determine near-term market moves.

Forecasts suggest that the headline Nonfarm Payrolls (NFP) is expected to show that employment increased at a slower pace and the Unemployment Rate rose mildly, which in turn can favor the US Dollar bears. Also likely to help the USD seller is a likely softening of the US Average Hourly Earnings. It’s worth noting, however, that Fed Chair Jerome Powell’s repetition of the hawkish remarks could tease the US Dollar buyers afterward.

Apart from a likely challenge to the USD bears by an anticipated hawkish speech from Fed Chair Powell, news that the US military forces are preparing to hit Iran-backed proxies across the Middle East could also give rise to the weekend rebound in the greenback.

May the trading luck be with you!