Markets Starting the New Week with Uncertainty
On Friday we saw some soft figures from the Non-Farm Payrolls report which sent the USD diving more than 100 pips lower across the board, with the logic that the US labor market is not tightening too much as some other employment reports have shown. Although, we did see a slight comeback late that day, ahead of the weekly close.
Today it seems that the USD is currently gaining strength against other currencies while we’re seeing a rebound in bond yields. The 10-year Treasury yields have increased, which is supporting the dollar’s rise. Notably, the EUR/USD pair has experienced a 0.4% decline, reaching a low of 1.0965. Despite briefly approaching a rebound above 1.1000, the pair has retreated as sellers are regaining near-term control, although the price is currently trading at the big round level. We are long on this pair since last night, hoping for a retest of Friday’s highs at 1.1040.
The euro’s sentiment is not positive at the moment due to worsening economic data and an impending policy change by the European Central Bank (ECB), although today’s investor confidence showed an improvement in the Eurozone, despite remaining negative. On the other hand, traders appear to have a better understanding of the Federal Reserve’s outlook. The upcoming US Consumer Price Index (CPI) data released this week will likely provide further validation for the current Fed expectations.
Eurozone August Sentix Investor Confidence
- August Sentix investor confidence -18.9 points vs -24.3 points expected
- July Sentix investor confidence -22.5 points
After experiencing deteriorating sentiment for three consecutive months, there has been an unexpected improvement in investor confidence within the euro area for the month of August. Despite Germany being currently perceived as the region’s struggling economy, investors are expressing a more optimistic view regarding inflation. This shift in perception is contributing to an overall improvement in the prevailing mood. However, it’s important to note that despite these positive developments, the Eurozone’s trajectory still suggests the likelihood of an impending recession. This somewhat mitigates the comfort derived from the recent improvements in sentiment.
In the USD/JPY pair, the dollar has gained 0.4% and is currently trading at 142.40. Buyers are aiming to maintain a rebound above the 142.00 level. Similarly, USD/CHF is also making gains, up 0.5% at 0.8770, and is potentially looking to test the 0.8800 level once again. USD/CAD is also showing resilience as the CAD remains soft after a weak report. We opened a buy USD/CAD signal last Friday which closed in profit, while today we also saw a dip which we decided to buy again.
EUR/USD Live Chart
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