We are down to the last leg of the week and it is time to take a look at the EUR/USD.
In the EUR/USD daily chart above, we see the currency pair rejected by the middle bollinger band.
While there was a downside push earlier, it remains to be seen if the EUR/USD can gather enough bearish pressure for another attempt at 1.2.
The price action is shaping out to be a long-term consolidation between 1.2 – 1.22.
Looking at the S&P 500 daily chart above, we see a significant dip which resulted in a loss on a monthly timescale.
The Cboe Volatility Index recorded an over 10% jump, and this indicates increased volatility. This is because of the increased risk aversion.
The USA ADP Non-Farm Employment Change turned out to be almost 50% lower than expected. Economists forecasted 203k jobs created, but only 117k were added. As ADP’s statistics are based on the payroll data of approximately 400,000 U.S. business clients, many view this as an early indication of the US Non-Farm Payroll result due at the end of the week. Any unexpected development will probably cause increased volatility.
The USA ISM Services PMI also turned out to be weaker than expected. It clocked 55.3 instead of 58.7. While this is not a significant difference, in view of the disappointing ADP results, negative sentiment towards the US economy probably increased. PMIs are closely monitored as it represents the sentiment of purchasing managers, which is a leading indicator of economic health.
In view of these developments, the EUR/USD is currently caught in a tussle. The negative sentiment towards the euro, due to the possibility of increased quantitative easing, and the negative sentiment towards the US dollar, because of the disappointing economic releases. This is why the price action is somewhat flat, as the currency pair finds its bearings.
The Week Ahead
There are important economic events this week. I highly encourage you to read through and learn about these events. This helps improve your understanding of the market sentiment.
USA Fed Chair Powell Speech
Speeches may reveal new insights into economic policies or contain a question and answer segment that at times go into unscripted topics resulting in unexpected developments and volatility.
USA Average Hourly Earnings
Consumer earnings is important due to it’s upstream impact. With more earnings comes possible increased consumer spending. This translates to revenues, leading to employment and business expansion.
USA Non-Farm Employment Change
USA Unemployment Rate
Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A low unemployment rate is an indicator of a healthy functioning economy.
The US Non-Farm Payroll is basically data released by the U.S. Bureau of Labor Statistics on a monthly basis that represents the total number of employed US workers, excluding the following employees:
– general government employees
– private household employees
– employees of nonprofit organizations which provide assistance to individuals
– farm employees
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