Daily Report: Dollar Holds Gain ahead of ECB and NFP

Dollar maintains overnight’s gain as markets are waiting for two important events ahead of the long weekend in US. The non-farm payroll report from US today could be market moving. Economists are expecting the report to show 210k growth in the job market in June. Unemployment is expected to be unchanged at 6.3%. The ADP private report showed a strong 281k growth in June, which is positive for the NFP. The employment component of ISM manufacturing was unchanged from prior month at 52.8. Meanwhile the four-week moving of initial claims rose slightly from 312k to 314k but the continuing claims dropped from 2.63m to 2.59m. Overall, the leading indicators for NFP suggests that we would likely have a slightly stronger than expected number today. US will also release ISM services, trade balance and jobless claims.

Another key event is ECB rate decision and press conference. It is widely expected that the ECB would stand on the sideline in July. Policymakers would take more time to assess the impacts of the stimulus package announced last month. President Draghi would mainly focus on providing more details on the design and expected impact of the measures announced in the June meeting and probably the preparatory work on small scale asset purchases (ABS). However, with the Eurozone’s inflation staying at recession level, policymakers are obliged to take more actions going forward. More in ECB To Stand On Sideline While Risks To Growth Intensifying.

Economic data to be released from Europe include Eurozone PMI services final, retail sales. The more important data would be UK services PMI. EUR/GBP breached recent support at 0.7958 after strong PMI manufacturing and construction released from UK earlier this week. We’d look for more strength in the pound should today’s data provide an upside surprise. Economists expected UK services PMI to drop slightly from 58.6 to 58.1 in June.

Released earlier today, Australia retail sales dropped -0.5% mom in May versus expectation of 0.3% mom. Building approvals rose 9.9% mom in May versus expectation of 3.5% mom. Aussie was hammered down by RBA governor Steven’s comments. Stevens said that Aussie’s exchange rate is “overvalued” and is set to fall significantly, “not by just a few cents”. He noted that “when judged against current and likely future trends in the terms of trade, and Australia‚Äôs still high costs of production relative to those elsewhere in the world, most measurements would say it is overvalued, and not by just a few cents.”

Daily Pivots: (S1) 0.9414; (P) 0.9456; (R1) 0.9484; More…

AUD/USD’s decline from 0.9054 accelerates downward today and breaks 0.9387 minor support. The development argues that a short term top is already formed at 0.9504. Intraday bias is back on the downside for 0.9211 support. Bearish divergence condition in daily MACD suggest that the rise from 0.8659 already. But, as long as 38.2% retracement of 0.8659 to 0.9504 at 0.9181 holds, we’d view price actions from 0.9504 as sideway consolidation only.

In the bigger picture, price actions from 1.1079 are viewed as a medium term correction. Recent development argues that it’s possibly finished at 0.8659 on bullish convergence condition in weekly MACD, ahead of 50% retracement of 0.6008 to 1.1079 at 0.8544. Rebound from there would extend higher to 38.2% retracement of 1.1079 to 0.8659 at 0.9583 first. Sustained break there will confirm this case and target 61.8% retracement at 1.0155 and above. However, break of 0.9080 near term support will dampen this bullish view and would likely extend the correction from 1.1079 to a new low.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
1:30
AUD
Retail Sales M/M May
-0.50%
0.30%
0.20%
-0.10%
1:30
AUD
Building Approvals M/M May
9.90%
3.50%
-5.60%
-5.80%
7:45
EUR
Italian Services PMI Jun

52.3
51.6

8:00
EUR
Eurozone Services PMI Jun F

52.8
52.8

8:30
GBP
Services PMI Jun

58.1
58.6

9:00
EUR
Eurozone Retail Sales M/M May

0.30%
0.40%

11:45
EUR
ECB Rate Decision

0.15%
0.15%

12:30
EUR
ECB Press Conference

12:30
CAD
Trade Balance (CAD) May

-0.3B
-0.64B

12:30
USD
Trade Balance May

-45.1B
-$47.2B

12:30
USD
Change in Non-farm Payrolls Jun

210K
217K

12:30
USD
Unemployment Rate Jun

6.30%
6.30%

12:30
USD
Initial Jobless Claims (JUN 28)

310K
312K

14:00
USD
ISM Non-Manufacutring Composite Jun

56.2
56.3

14:30
USD
Natural Gas Storage

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