Trade balance and central banks ahead of NFP LeapRate


    This article was submitted by Michael Stark, Market Analyst Exnes.

    Stock market action was muted this week after various major indices finished with their best month since 2020. Traders’ focus this week is on NFP, which could provide more clues about the outlook for the US economy in the coming months. This weekly data preview looks at EURUSD and GBPAUD.

    The Fed’s 0.75% hike last week was expected, so it didn’t have much of an impact on the markets. There was some relief that the worst scenarios for the end of the year, ie. 4.25-4.5% and above are now looking less and less likely. This week’s main monetary policy events are the meetings of the Reserve Bank of Australia on Tuesday morning and the Bank of England on Thursday. The former is likely to require a double hike, taking the cash rate to 1.85%, while the outcome of the BoE meeting remains uncertain between a one- and two-step hike.

    The main regular releases this week are US jobs on Friday afternoon. Canadian employment data is due at the same time, and traders are also looking ahead to trade balances from various countries on Wednesday and Thursday. It’s a fairly active data week, but there is a low chance of very big moves ahead of NFP for the dollar, gold and US indices.

    Euro-dollar, daily

    The euro has cautiously rebounded from parity against the US dollar in recent weeks as the outlook for monetary policy in the eurozone has turned more bleak. Inflation was higher than expected and probably not yet peaked for both the EU and the US, but the difference has been wider in the eurozone over the past few months. Participants also point to negative US GDP growth last week for the 2nd quarter, indicating a technical recession, while in the Eurozone, last week’s express releases were broadly positive.

    A sustained bounce seems unlikely ahead of NFP, but the chart also suggests some upside. Around the middle of last month, there was a bounce from the oversold and stochastic crossover, while the price is not yet completely overbought. The volume increased compared to the average for the 2nd quarter. The next major resistance is the confluence of the 50 SMA with the 38.2% area of ​​the weekly Fibonacci fan.

    The NFP result seems likely to be the next key catalyst for the Euro-Dollar. With comments from the Fed last week of a strong labor market, rising unemployment, or particularly disappointing NFPs are likely to see the euro rally strongly, at least in the short term.

    This week’s key data

    Fat indicates the most important releases for that symbol.

    Tuesday, August 2

    • 14:00 GMT: JOLTs Jobs (June) – Consensus 11M, Prev 11.25M

    Wednesday, August 3

    • 6:00 GMT: German trade balance (June) – consensus negative €13.6bn, previous €500m
    • 14:00 GMT: ISM Non-Manufacturing PMI (July) – Consensus 53.5, Pre 55.3

    Thursday, August 4

    • 12:30 GMT: US trade balance (June) – consensus negative $80.1 billion, previous negative $85.5 billion

    Friday, August 5

    • 12:30 GMT: Nonfarm payrolls (July) – consensus 250,000, pre 372,000
    • 12:30 GMT: US Unemployment Rate (July) – Consensus 3.6%, previous 3.6%
    • 12:30 GMT: Average annual salary in America (July) – consensus 4.9%, previous 5.1%
    • 12:30 GMT: US monthly average hourly earnings (July) – consensus 0.3%, previous 0.3%

    Pound to Australian dollar, daily

    The pound lost ground against the Australian dollar last month amid political instability in the UK and continued uncertainty over the Bank of England’s next move. While the probability of a two-step hike on Thursday by the Bank of England is now almost 80%, a hike of the same size by the Reserve Bank of Australia at midday GMT tomorrow seems almost certain. Although inflation in Australia was slightly lower than expected last month, the labor market there appears to be quite robust, supporting the RBA’s policy of tightening inflation without a serious risk (for now) of triggering a recession .

    The main technical reference on the GBPAUD daily chart remains the 0% weekly Fibonacci retracement zone, the low around the new 2021 year. Since the start of the second quarter of this year, there have been four failed tests to the downside of $1.73, so this looks like strong support that is likely to hold unless this week’s meetings and data are a big surprise.

    $1.77 is an important resistance that is likely to be tested if the pound rises in the next few weeks, but the key short-term target for those bullish on a double BoE hike could be the area between the 100 and 200 SMA. The fact that both central banks are meeting for three days increases the likelihood of volatility in the symbol as participants use the new information to try to price in future rates over the next few months.

    This week’s key data

    Fat indicates the most important releases for that symbol.

    Tuesday, August 2

    • from 4:30 GMT: Reserve Bank of Australia statement and press conference

    Wednesday, August 3

    • 1:30 GMT: Australian Retail Sales (Final June) – Consensus 0.2%, Prev 0.9%
    • 8:30 GMT: UK S&P Global/CIPS Service PMI (Final, July) – Consensus 53.3, Prev 54.3

    Thursday, August 4

    • 1:30am GMT: Australia’s trade balance (June) – consensus A$14bn, pre A$15.97bn
    • from 11:00 GMT: Bank of England statement and press conference

    Disclaimer: The opinion is personal to the author and does not reflect the opinion of Exness or LeapRate.

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