Dollar Dynamics Ahead of Key NFP Release and Fed Meeting
EUR/USD Eyes Support as Dollar Bulls Gain Momentum
Last week’s main story was the release of the U.S. Personal Consumption Expenditures Index (PCE), which showed that inflation increased at a restrained pace. The Personal Spending survey that came out at the same time showed that consumers accelerated their spending, a sign of a healthy economy.
The US Dollar Index (DXY) went up steadily throughout the week but the greenback had a better run against the Euro, bringing it below resistance and closer to the 50-day Moving Average. This week we are likely to see some interesting chart moves as the Fed will announce the interest rate and later in the week, the always-important jobs data will come out.
According to the CME FedWatch tool, there’s a 95.9% chance that the rate will remain unchanged but there’s an 87.7% chance that it will be cut at the next meeting that takes place in September.
Economic Calendar Highlights
The first notable release will be the German Inflation data which is due Tuesday at 12:00 pm GMT. The CPI is expected to increase to 0.3% from the previous 0.1%, which is quite an acceleration and could affect the single currency. Later in the day, at 2:00 pm GMT, the U.S. Consumer Confidence survey will come out.
Wednesday will be a busy day, with the Eurozone CPI Flash Estimate and Core version of the same indicator coming out at 9:00 am GMT, followed at 12:15 pm GMT by the ADP Non-Farm Employment Change and at 6:00 pm GMT but the U.S. Federal Funds Rate. Fed Chair Powell will hold the usual press conference at 6:30 pm GMT.
Thursday at 11:00 am GMT, the Bank of England will announce the rate, which is expected to drop from the current 5.25% to 5.00%. If this happens, we will see interesting dynamics between the USD and GBP as their monetary policies start to diverge.
The final and most important event of the week will be the U.S. jobs data set for release on Friday at 12:30 pm GMT. The Non-Farm Payrolls report is expected to show 177K new jobs, down from the previous 206K. However, recent forecasts have been inaccurate, with actual numbers often significantly exceeding estimates. At the same time, the Average Hourly Earnings and Unemployment Rate will come out, offering a clearer picture of the U.S. jobs situation.
Technical Outlook – EUR/USD
Although the pair did not create a triple top, it reversed soon after overshooting the previous double top. The last few Daily candles have been small and with long wicks, which is a sign of indecision and shows that probably most traders are waiting for the data that’s coming out during the week.
The 50-day Moving Average is in close vicinity, offering some support but it looks like the dollar bulls are gaining some momentum and may push through the MA. If this happens, the support at 1.0775 will become the next target. However, the technical side will be probably overshadowed by the economic data that comes out during the week.
