Daily Commentary | 04/02/2019
USD strengthens after January’s employment report
The greenback got some support after the US employment report for January and the ISM manufacturing PMI showed stronger than expected readings. Analysts point out that the solid jobs report and the increased manufacturing activity, eased concerns for a potential slowdown in the US economy. Also the US 10 year treasury yield rose somewhat providing additional support for the USD, which under certain circumstances could linger on in the near term. The market may continue to favor USD long positions in the next few days, should the effect be maintained. As analysed in Friday’s report, EUR/USD dropped on Friday and during today’s Asian session, breaking the 1.1460 (R1) support line now turned to resistance. We could see the pair trading in a bearish market today, as financial releases are expected to weaken the common currency, while on the other hand support the greenback. Should the bears continue to reign over the pair’s direction, we could see it breaking the 1.1425 (S1) support line and aim for the 1.1385 (S2) support barrier. Should on the other hand the pair’s direction be dictated by the bulls, we could see it breaking the 1.1460 (R1) resistance line and aim for the 1.1495 (R2) resistance barrier.
RBA’s Interest rate decision
RBA is to announce its interest rate decision tomorrow during the Asian session (03:30 GMT) and is widely expected to remain on hold at +1.50%. Currently AUD OIS imply a probability for the bank to remain on hold of 98.90% strengthening the arguments for such a scenario. Despite RBA’s optimistic tone, weakening financial data and trade uncertainty may provide a number of more dovish comments in the accompanying statement. Analysts point out that market expectations have started to emerge, for a possible rate cut in contrast to the bank’s implied view that its next move was to be a hike. Should the bank negatively surprise the markets we could see the Aussie weakening. AUD/USD continued to trade in a sideways movement yesterday with some bearish tendencies as it tested the 0.7230 (S1) support line. We could see the pair continuing to trade in a bearish market, especially if there are any negative surprises in RBA’s interest rate decision. Should the pair come under the selling interest of the market, we could see it breaking the 0.7230 (S1) support line and aim for the 0.7150 (S2) support barrier. Should on the other hand the pair’s long positions be favored by the market, we could see it aiming if not breaking the 0.7330 (R1) resistance line.
Today’s other economic highlights
In today’s European session, we get Turkey’s CPI rate for January, the UK construction PMI for January and Eurozone’s PPI rate for December. In the American session, we get the US factory orders growth rate for November.
As for the week ahead
On Tuesday, from Australia, we also get the retail sales and trade balance for December, while from the UK the services PMI for January, from the Eurozone the retail sales for December and from the US the ISM non-manufacturing PMI for January. On Wednesday, we get Germany’s industrial orders for December and from New Zealand the employment data for Q4. On Thursday, we get from Germany the industrial output and from the UK the BoE interest rate decision. On Friday, we get from Japan the current account balance for December and from Canada the employment data for January.
• Support: 0.7230 (S1), 0.7150 (S2), 0.7065 (S3)
•Resistance: 0.7330 (R1), 0.7425 (R2), 0.7500 (R3)
• Support: 1.1425 (S1), 1.1385 (S2), 1.1345 (S3)
•Resistance: 1.1460 (R1), 1.1495 (R2), 1.1525 (R3)