June’s US employment report in the spotlight

USD lost some ground against its counterparts yesterday and today we highlight the release of the US employment report for June. Market expectations are for the Non-Farm Payrolls figure to drop to 190k if compared to May’s 272k, the unemployment rate to remain unchanged at 4.0% and the average earnings growth rate to slow down to 3.9% yoy if compared to May’s 4.1% yoy. If the actual rates and figures meet their respective forecasts, we may see the USD retreating as the release could imply an easing employment market which in turn may add more pressure on the Fed to start cutting rates. Yet also note that uncertainty is high for the actual rates and figures, which in turn may enhance volatility at the time of the release.

USD/JPY edged lower yesterday nearing the 160.35 (S1) support line. Given that the upward trendline guiding the pair since the 5 of June has been broken we switch our bullish outlook in favour of a sideways movement bias initially. We note though that the RSI indicator under our daily chart, despite dropping is still at relatively high levels, yet it may implying that the bullish sentiment is easing. For a bearish outlook we would require the pair to clearly break the 160.35 (S1) support line and start aiming for the 157.75 (S2) support level. Should the buying interest be renewed, we may see USD/JPY bouncing on the 160.35 (S1) support line, breaking the 163.00 (R1) resistance line reaching new 34 year highs and we set as the next possible target for the bulls the 166.00 (R2) resistance barrier.

At the same time, we also get Canada’s June employment data. The unemployment rate is expected to tick up to 6.3%, while the employment change figure is expected to drop to 22.5k if compared to 26.7k in May. Overall, the forecasted data tend to imply further easing of the Canadian employment market and should they be verified they could weigh on the Looney.

USD/CAD is dropping over the past three days and during today’s Asian session and is currently testing the 1.3600 (S1) support line. Further more we also note that the RSI indicator is now aiming for the reading of 30, implying that the bearish sentiment may be intensifying. Yet for us to abandon our bias for a sideways motion in a favour of a bearish outlook, we would require the pair to clearly break the lower boundary of the rangebound motion, namely the 1.3600 (S1) support line and open the gates for the 1.3460 (S2) support level. For a bullish outlook, despite being currently considered as remote we would require the pair to break the 1.3775 (R1) resistance line clearly, with the next possible target for the bulls being the 1.3895 (R2) level.

Across the Atlantic, in the UK the general elections have ended and the Labour Party seems to be in the lead as the final results are still being expected, securing a comfortable majority in the UK Parliament. The pound seems to have gotten some additional support, as the wide majority of the Labour party, seems to provide a relative stability in the UK political outlook.

On the other side of the Channel, the markets brace for the second round of the French legislative elections. It should be noted that in the first round Marine Le Pen’s far-right National Rally (NR), scored a win, yet other parties moved to block NR from getting a majority. It should be noted that a possible win of Le Pen’s party could intensify centrifuge forces within the EU. Market-wise we expect that such a scenario could weigh on the EUR and French stockmarkets on Monday’s opening.

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Today we note the release of Germany’s industrial output, Sweden’s GDP rate and Eurozone’s retail sales, all for the month of May. On the monetary front, we note that NY Fed President Williams and ECB’s Elderson and President Lagarde are scheduled to speak. We note that the ECB President may express some hesitation for more rate cuts and such statements could provide support EUR. On Monday’s Asian session, we note the release of Japan’s current account balance for May.