By Adheesh Singh
Last Friday we saw total U.S. Nonfarm Payrolls employment rise by 257, 000, beating expectations of a 228, 000 rise. The USD is gaining across the board, following the NFP figures and boosted by the sentiment that the Federal Reserve will hike rates sooner than later. Charles Plosser, the President of the Federal Reserve Bank of Philadelphia commented about the monetary policy being data dependent and that he would push for raising interest rates, however he is not a voting member of the Federal Open Market Committee.
Based on his comments, this could lead to a hawkish view on the USD currency against major pairs. As a result of the NFP we saw EUR/USD and GBP/USD fall 100 pips against the Dollar. Another key event from last week that factored into the Euro weakness was the result of the Greek elections, with the new party leaders intent to renegotiate the terms of their bailout.
The clash between the Greek finance minister Yanis Varoufakis and the German finance minister Wolfgang Schauble, summarized both of their countries positions on debt renegotiation. Today, European Trade Balance and Sentix Investor Confidence came out better than expected at € 21.8 billion and 12.4, which allowed the Euro to claw back some losses, post NFP.
The EUR/USD pair rose from a low of 1.13215 to a high of 1.13561. Despite the short term Euro strength, with the Euro Zone political uncertainty and US strength, the Euro is more likely to fall dropping below 1.13 and may trade around the 1.12 level.
Technical analysis suggests the Euro will weaken against the Dollar, according to the 1 hour chart, we can see a double top formation, with a clear break below the neckline and should fall to the previous level of consolidation on the lower end of 1.12. Later on today, we will look towards the labour market conditions for the U.S, which was previously 6.1.
Following last week the Greek and European Union discussion will keep political uncertainty running high which will impact major currencies such as the Dollar and Sterling. For a majority of the week, we will see little to no impactful economic sentiments, which will allow traders to trade directly of technical charts, with little to no fundamental impacts in the currency market. Later on this week, key data releases such as the Bank of England Quarterly Inflation Report, Mark Carney’s speech, Australian Employment change/ rate and European GDP figures will give a better indication of the direction in which the key pairs will be trading at.