Market Pulse Check: Fed’s Hawkish Signals and NFP Data
EUR/USD: Bulls Fail at Resistance Once More. Downward Pressure Increases.
Get ready for an exciting week as investors await the release of the minutes from the U.S. Federal Reserve’s June meeting, as well as the always-important Non-Farm Payrolls (NFP) data. At the last meeting, the central bank decided to maintain interest rates at their current level, but they did drop some clues that borrowing costs still need to go up (possibly by 0.50%) by year’s end.
According to the CME FedWatch tool, there’s an 84% chance that the Fed will raise rates by 25 basis points in its upcoming July meeting.
The data that came out last week painted a pretty positive picture of the U.S. economy, which helped alleviate concerns about a potential recession. However, it also fueled expectations that the Fed will continue to tighten its monetary policy.
The inflation rate in May turned out to be cooler than expected: the year-over-year PCE Price Index dropped from 4.3% to 3.8% and the monthly Core PCE Price Index dropped from 0.4% to 0.3%. Also, there was a sudden slowdown in consumer spending. These factors provide more evidence that the Fed’s interest rate hikes are indeed having the desired impact.
Key Data for the Week Ahead
Monday, 2:00 pm GMT – ISM Manufacturing PMI: This indicator provides a snapshot of the manufacturing sector’s health. It examines factors such as new orders, production levels, and employment, offering valuable insights into economic growth.
Wednesday, 6:00 pm GMT – FOMC Meeting Minutes: These minutes offer detailed insights into the discussions and decisions made by the Federal Reserve regarding monetary policy. Investors pay close attention to the FOMC minutes, as they can reveal clues about future interest rate changes,
Thursday, 2:00 pm GMT – ISM Services PMI: Similar to its manufacturing counterpart, the ISM Services PMI measures the health of the services sector. It provides insights into areas such as business activity, new orders, and employment trends, reflecting the broader economic landscape.
Friday, 12:30 pm GMT – Non-Farm Employment Change, Average Hourly Earnings, and Unemployment Rate: This trio of significant indicators is part of the highly anticipated monthly U.S. jobs report. Average Hourly Earnings measures wage growth, Non-Farm Employment Change gauges job creation or loss, and the Unemployment Rate reflects the percentage of the labor force without jobs. These figures have a profound impact on market sentiment and can influence monetary policy decisions.
Technical Outlook – EUR/USD
Taking a look at the chart below, it becomes rather clear that the pair is experiencing downward pressure and facing resistance around the 1.1000 level. The price is currently at 1.0875 and is hovering near the 50-day Moving Average, indicating a neutral to slightly bearish sentiment.
The fact that the price is at the middle line of the Bollinger Bands, suggests a period of consolidation or lack of significant volatility. Additionally, the fact that the Relative Strength Index (RSI) is going down indicates a potential weakening of buying momentum.
A lot will depend on the data that’s coming out this week, especially the upcoming Non-Farm Payrolls report, which will heavily influence market sentiment and potentially impact the EUR/USD pair.
