EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(June 08 - June 12, 2020)
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US Dollar Fundamental Outlook: The US Economy Fares Better Than Expected - USD Rebounds On Unbelievable NFP Number
Economists were expecting another dismal month for the US jobs market, but the reports last Friday surprised everyone. The consensus forecasts projected 8 million jobs to be lost and the unemployment rate to have climbed near 20%. However, the actual NFP number showed not only jobs weren’t lost, but the economy created 2.5 million jobs! The unemployment rate also declined to 13.7% (from 14.7% in the previous month). Other US
data reported last week was solid too.
This favorable turn of events ahead of the Fed meeting on Wednesday will give the US central bank additional reasons to wait and see without adding more stimulus for the time being. Markets expect no big changes from the FOMC, so the focus will be on forward guidance and the post-meeting presser. Chair Powell may also talk about their plans for potentially implementing yield curve control policy.
The dollar snapped out of a 7-day losing streak on Friday on the back of the strong labor reports and overextended technical levels. But, now that the hopes for a V-shaped recovery have been vigorously revived, risky assets and currencies may continue to rally. That would not be a favorable environment for the dollar, although the technical rebound may extend in the near-term.
Euro Fundamental Outlook: ECB Boosts PEPP By €600 Billion, Helping to Extend EUR Rally
The European Central Bank gave the market what it wanted at their meeting last week. They increased the size of the Pandemic Emergency Purchase Program (PEPP) by 600 billion euros, which extended the euro’s rally to almost 1.14 versus the dollar. The decision was celebrated not only economically, but politically also because the ECB demonstrates a strong commitment to a more unified Europe.
The ECB was also unfazed by the German court’s ruling that their PEPP bond-buying program may be violating the German constitution. The markets now have the hopes high that the EU will move toward greater political unity, and European leaders will have to deliver or risk disappointing investors. The €500-€750 billion EU recovery fund should be approved and those expectations are helping to create a solid base for the euro. EURUSD may consolidate in the
near-term, but more EU positive news can drive the pair further higher.
The EUR Forex calendar is light for the week ahead, so politics and COVID-19 will remain the main factors to impact the exchange rate.
EURUSD Technical Outlook:
EURUSD cleared the important 1.12 resistance last week, and now all focus is on the 1.15 price zone as the next key resistance. Last week’s stellar bullish price action clarifies the technical situation and suggests not much can stop EURUSD from reaching the 1.15 area.
The pair is now testing the 1.1350 zone, which is another key resistance zone. Although the price managed to rise to 1.1380, it closed the week below the 1.1350 level, indicating the resistance held. The 200-week moving average (red line), together with past highs in this area helps to solidify the resistance here. Perhaps, if EURUSD breaks through 1.1350, it will be easier to break 1.15 also. In such a scenario, the multi-year falling trendline will come into
focus as heavy resistance. Currently, it stands around the 1.17 level.
To the downside, 1.12 may act as support now, Lower, 1.10 is the more important support.
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