New month, new and old reasons to fall, levels to watch
- EUR / USD extended its dollar-induced declines into the new quarter.
- US data and fears of the Delta variant could push the pair even lower.
- Thursday’s four-hour chart shows the euro / dollar is not yet oversold.
End-of-month flows to hit the dollar? Not this time. King Dollar has proven itself also in the midst of the frantic movements typical of the season. On the contrary, the greenback gained further ground, pushing the EUR / USD to levels last seen in early April.
the The Federal Reserve’s hawkish turn in June continues to support the dollar, and the latest comments from Dallas Fed Chairman Robert Kaplan reminded us of this shift. Kaplan wants to start cutting back on the bank’s $ 120 billion-per-month bond buying program. He was the only voice supporting a stricter policy, but he was joined by others, most recently Christopher Waller earlier this week.
Economic data also keeps the greenback in the green. On Wednesday, ADP’s private sector employment report topped estimates at 692,000. While investors are aware that the correlation between the payroll company’s numbers and the official numbers is low, it adds a support.
Thursday, the focus is on the ISM Manufacturing Purchasing Managers Index for June – the latest index to non-farm wages from Friday. Overall statistics are expected to hold above 60, reflecting the rapid recovery, and investors will look at the employment component as a hint towards the NFP.
See ISM Manufacturing Preview: Expansion will continue, but how bad is the labor shortage?
On the other hand, the Price paid component, which represents inflation expectations, could subside from record highs and weigh on the greenback. However, it may be drowned out by other positive factors for the greenback. Weekly jobless claims are expected to fall below 400,000 for the week ending June 25.
Speculation before the all-important Friday Non-agricultural payroll figures could trigger jerky movements. Again, economists are projecting a relatively large number, which could become a source of disappointment. However, any decline in the dollar might only come in response to the NFP, not before.
More NFP Sneak Peek: Four Reasons June’s Jobs Report Could Be a Dollar on the Fall
On the old continent, Markit’s manufacturing PMIs far exceeded estimates, providing some support for the common currency. On the other hand, the fears of Variant of covid delta – which is very contagious – weigh on the feeling. The summer holidays dear to Europeans could suffer setbacks.
Overall, Thursday will likely see further declines for the currency pair.
EUR / USD technical analysis
The euro / dollar is hovering around the lowest levels since early April, as the four hour chart shows. The momentum is down and the Relative Strength Index (RSI) remains above 30, therefore outside of oversold conditions. The bears are in control.
Immediate support is at 1.1837 daily low, followed by 1.1825, which capped the currency pair in April. Lower, 1.1780, 1.1735 and 1.17 all played a role in early spring and could be in the spotlight if the downtrend continues.
There is some resistance at 1.1885 which provided support early in the week. It is followed by 1.1910, where the simple moving average of 50 hits the price. Higher 1.1950 and 1.1975 are the next levels to watch.
Snapshot of the non-farm payroll in the United States in June: analysis of the reaction of major pairs to the NFP surprises