EUR/USD: the sustainability of current growth is questionable
The EUR/USD pair, which maintains a long-term downward trend, is showing an uptrend this week, checking the value of 1.0803 at the Murray level [5/8].
Weak US economic reports and minutes of the June meeting of the US Federal Reserve put the dollar under pressure. Employment data from ADP showed a slowdown in growth to 150,000 jobs, which was the lowest result since February. Weekly statistics also revealed an increase in the number of initial applications for unemployment benefits to 238 thousand and an overall increase in recipients of state support to 1,858 million, which is the highest since March. These signs of a slowdown in the labor market reinforced expectations of easing the Fed's monetary policy, highlighted by the regulator's recognition of slowing economic activity and reducing inflationary pressure in recent minutes, and also noted a decrease in wage growth and lower prices for large enterprises.
Despite this, the recent rise in EUR/USD may be short-lived, as the probability of an interest rate correction by the European Central Bank also increases. Recent data on inflation in the eurozone showed positive dynamics: the consumer price index adjusted from 2.6% to 2.5% year-on-year, the producer price index improved from -5.7% to -4.2%, and the composite business activity index fell from 52.2 to 50.9 points, which may push the ECB to a softer monetary policy at the upcoming September meeting.
- Resistance levels: 1.0803, 1.0864, 1.0945.
- Support levels: 1.0742, 1.0620, 1.0559.
USD/CHF: stagnation of consumer prices in Switzerland in June
The USD/CHF pair is experiencing a technical correction this week, approaching an important psychological support mark at 0.9000. The pressure on the US currency is increasing due to the festive lull in investor activity in the United States, due to the celebration of Independence Day. At this time, traders are analyzing the latest macroeconomic data: the decline in the ISM index of business activity in the service sector in June from 53.8 to 48.8 points, which is significantly lower than the expected 52.5 points, was particularly worrying. Statistics from S&P Global also showed a slight change, from 55.1 points to 55.4 points, although no changes were expected. In addition, the volume of production orders decreased by 0.5% in May after an increase of 0.4% in the previous month.
Tomorrow at 14:30 (GMT+2), the June report on the US labor market is expected to be published, which may have a significant impact on the Fed's interest rate policy. Forecasts suggest a reduction in the number of new jobs outside the agricultural sector from 272.0 thousand to 190.0 thousand, a decrease in the average hourly wage from 4.1% to 3.9% per annum and from 0.4% to 0.3% monthly, with an unchanged unemployment rate of 4.0%. At the Sintra forum, US Federal Reserve Chairman Jerome Powell said that the regulator maintains a wait-and-see attitude regarding interest rate adjustments, while carefully assessing the risks between controlling inflation and a possible deterioration in the labor market. The Fed's official forecasts suggest a possible interest rate cut of 25 basis points by the end of the year to 5.10%, while experts predict one to two adjustments, possibly as early as September.
- Resistance levels: 0.9037, 0.9071, 0.9100, 0.9130.
- Support levels: 0.9000, 0.8964, 0.8935, 0.8900.
USD/JPY: medium-term economic background undermines the yen's position
The USD/JPY currency pair shows an upward trend in the long term: yesterday the maximum of the year was reached at 161.95, but today's trading showed a slight decrease. Pressure on the dollar was exerted by the latest employment data from ADP and the contents of the minutes of the June meeting of the US Federal Reserve System, where there was a minimal increase in employment since February — only 150,000 jobs, as well as recognition of the slowdown in economic recovery and weakening inflation processes, which may encourage the Fed to switch to a softer monetary policy in the fall.
Nevertheless, the medium-term fundamental analysis still looks unfavorable for the Japanese yen. The Bank of Japan's interest rates remain significantly lower compared to other developed countries, and in light of Japan's current economic weakness, which showed a 0.5% quarter-on-quarter decline in GDP, the Bank of Japan has shown no desire to raise them. The business activity index fell to 49.7 points in June, indicating stagnation. In this context, although the Japanese government is ready for currency interventions, experts believe that at significant cost, the effect of such measures will be temporary, and the growth of the USD/JPY pair is likely to continue in the near future.
- Resistance levels: 162.50, 164.06, 165.62.
- Support levels: 159.37, 157.81, 156.25.
Silver market analysis
Yesterday, silver prices rose by 3.3%, reaching the level of 30.49, following the publication of US GDP data for the second quarter and minutes of the last Fed meeting.
US GDP grew by 1.5% in the second quarter, which was lower than the expected 1.7% and the previous figure of 1.7%, which was confirmed in the report of the Federal Reserve System. Most of the participants in the June meeting noted that economic growth in the United States is gradually slowing down. They expressed their readiness to respond to macroeconomic dynamics, including through easing monetary policy if necessary. Such prospects strengthened investors' expectations regarding a possible reduction in interest rates in September from 63.4% to 66.5% per day, which contributed to the weakening of the dollar and the growth of silver quotations to this level.
- Resistance levels: 30.71, 32.23.
- Support levels: 28.72, 27.55, 26.26.