Dollar Struggles to Ride on Strong NFP, Retreating Mildly

Market overviews

Dollar struggles to ride on stronger than expected non-farm payroll growth, and it’s indeed retreating notably in early US session. Stocks are also not too enthusiastic so far, with DOW futures up only around 0.2% at the time of writing. Still, the greenback is more likely to finish as the strongest one for the week, followed by Yen. Canadian Dollar is trading to catch up. But Australian and New Zealand Dollar remain the worst.

Technically, as USD/CAD dips notably, we’d pay attention to 4 hour 55 EMA (now at 1.2353). Break there will bring deeper fall towards 1.2251 support. That, if happens, could be an earlier warning that Dollar is turning weaker elsewhere again.

In Europe, at the time of writing, FTSE is up 0.20%. DAX is up 0.55%. CAC is up 0.17%. Germany 10-year yield is down -0.0381 at -0.235. Earlier in Asia, Nikkei rose 0.27%. Hong Kong HSI dropped -1.80%. China Shanghai SSE dropped -1.95%. Singapore Strait Times rose 0.15%. Japan 10-year JGB yield rose 0.0059 to 0.046.

US non-farm payroll grew 850k in Jun, unemployment rate rose to 5.9%

US non-farm payroll employment grew 850k in June, well above expectation of 675k. Prior month’s figure was also revised up from 559k to 583k growth. Total employment was up by 15.6% since April 2020, but down by -6.5m, or -4.4%, since pre pandemic level in February 2020.

BLS also said, “notable job gains occurred in leisure and hospitality, public and private education, professional and business services, retail trade, and other services.”

Unemployment rate rose to 5.9%, up from 5.8%, above expectation of 5.6%. But number of unemployment person was little changed at 9.5m. Labor force participation rate was unchanged at 61.6%. Average hourly earnings rose 0.3% mom, versus expectation of 0.4% mom.

Also released, US trade deficit widened to USD -71.2B in May, versus expectation of USD -71.0B.

From Canada, building permits dropped -14.8% mom in May, versus expectation of 0.3% mom. Trade balance came in at CAD -1.4B deficit in May, versus expectation of CAD 0.4B surplus.

Eurozone PPI rose 1.3% mom, 9.6% yoy in May

Eurozone PPI rose 1.3% mom, 9.6% yoy in May, slightly above expectation of 1.2% mom, 9.5% yoy. For the month, industrial producer prices increased by 2.1% in the energy sector, by 1.8% for intermediate goods, by 0.4% for capital goods and by 0.3% for durable consumer goods and for non-durable consumer goods. Prices in total industry excluding energy increased by 0.9%.

EU PPI rose 1.4% mom, 9.6% yoy. For the month, industrial producer prices increased in all Member States, with the highest increases being recorded in Ireland (+5.3%), Denmark (+3.3%) and Finland (+2.6%).

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1830; (P) 1.1857; (R1) 1.1876; More…

Some jitter is seen in EUR/USD in early US session. But intraday bias stays on the downside with 1.1883 minor resistance intact. Fall from 1.2263, as the third leg of the consolidation pattern from 1.2348, should target 1.1703 support. On the upside, above 1.1883 minor resistance will turn intraday bias neutral first. But break of 1.1974 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. Reaction from 1.2555 should reveal underlying long term momentum in the pair. However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:50 JPY Monetary Base Y/Y Jun 19.10% 24.30% 22.40%
09:00 EUR Eurozone PPI M/M May 1.30% 1.20% 1.00% 0.90%
09:00 EUR Eurozone PPI Y/Y May 9.60% 9.50% 7.60%
12:30 CAD Building Permits M/M May -14.80% 0.30% -0.50%
12:30 CAD Trade Balance (CAD) May -1.4B 0.4B 0.6B
12:30 USD Nonfarm Payrolls Jun 850K 675K 559K 583K
12:30 USD Unemployment Rate Jun 5.90% 5.60% 5.80%
12:30 USD Average Hourly Earnings M/M Jun 0.30% 0.40% 0.50% 0.40%
12:30 USD Trade Balance (USD) May -71.2B -71.0B -68.9B -69.1B
14:00 USD Factory Orders M/M May 1.40% -0.60%