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Markets to act like a zoombie ahead of the US NFP data
Euro could pop well above the 1.20 mark against the dollar
Dollar bulls are keeping their hopes up especially after a stellar revision of the Q2 US GDP

European market and US futures are trading higher ahead of the most watch economic data on the face of the earth. The markets tends to act like a zombie before the US NFP data is released. Today is not going to be any different either, unless of course, we see some sort of surprise in terms of geopolitical tensions.

What traders have priced in very much in the market is that the Fed is going to struggle with respect to any further rate hike for this year. However, the dollar bulls are keeping their hopes up especially after a stellar revision of the Q2 US GDP. It came well ahead of the expectations and ignited the rally in the dollar index. But the question was for how long this rally would last and if it has any legs to stand on?

One of the forward looking indicator is your US pending home sales data and the number released on Thursday wasn’t encouraging at all. It broke the dollar bulls back. What it tells you that the affordability ratio is falling due to the hike in the interest rate and wages are stagnant. In other words, we are highly likely to consolidate. We will not be surprised if the index does not start to roll over. The personal income data in the US does show that the number has improved (0.4%) relative to the last month however, consumers are not spending. The personal spending number (0.3%) was shy off expectations (0.4%).

The Fed is confident about the labour market more than their inflation target of 2%. However, the recent catastrophe caused by Hurricane Harvey is going to create more headwinds for the labour market. The upcoming unemployment claims number is going to rise. If we look at a similar situation; Hurricane Katrina, it becomes evidently clear the unemployment claims tends to rise in the following weeks.

What about gold and for Euro

The ECB is concerned about the euro strength and this took some of the steam out of the euro-dollar pair. However, the US NFP number has ability to provide a massive tailwind for this pair. The euro-dollar pair could start its net mile stone journey towards the 1.25 is the number disappoints investors tomorrow. Even if the US NFP number matches the forecast it would still be translated as a dovish signal for the Fed and negative influence for the dollar. Both the US payroll number and wage growth have to pull their weight. In other words, the bar is set high for the dollar index to beat expectation.

August has been a phenomenal month for gold price. We do think that good days are still ahead for the shining yellow metal. Why? We still have the issues of US debt ceiling, nothing on the tax reform, no announcement on the stimulus package and the geopolitical tensions are becoming worse. Basically, there are several pillars which could potentially continue to support gold price. We do think that it is highly likely that if we stay above the $1300 , gold price could easily touch $1370 this month.

As soon as the buck stopped to receive feeding from various macroeconomic data releases, the yellow metal started to actively recover. In result of the yesterday's surge, the pair has entered into a junior descending channel. Accordingly, today it is expected to move downwards, successfully breaking through the weekly R3 at 1,316.51. Nevertheless, the fall is not expected to last for long due to presence of a combined support level set up by the 55- and 100-hour SMAs. On the other hand, there is a need to take into account an effect from release of another fundamental data later this day. If it fails to justify expectations, the weakening buck might push the pair out of the channel in the northern direction.

The way the currency rate moved yesterday completely matched with expectations. Due to absence of any additional stimulus, the buck continued to lose value against the Yen up until the weekly R1 at 109.92. The pair made a few attempts to break to the bottom but failed. For today, projection remains approximately the same. The pair is not expected to resume a successful plunge, as the southern side remains reliably protected by the 100- and 200-hour SMAs as well as by the weekly and monthly PP. On the other hand, a release of the US employment data today at 12:30 GMT might alter this scenario and, in contrast, help the buck to surge towards the weekly R3 at 111.13.

As it was projected, in the first half of the previous trading day the currency rate had easily plunged to the weekly PP at 1.2858, using barrier-free area on its way. However, by the end of the day the Pound has already managed to restore all lost positions and confirmed an existence of junior descending channel. As a result, today the exchange rate is expected to keep moving in the southern direction in an attempt to reach the 200-hour SMA near 1.2858. However, there is a need to remember that release of information on the UK Manufacturing PMI as well as the US Average Hourly Earnings and Non-Farm Employment Change might significantly alter the above scenario, depending on the result.

In line with expectations, yesterday the buck relentlessly tried to break though the combined support level formed by the monthly PP, the 200-hour SMA and the ascending channel's bottom boundary. As it was suspected, it managed to slightly overstep beyond the barrier. However, the downside momentum was not strong enough to fix the result. Today the pair is expected to make one more unsuccessful attempt to slip to the bottom. The only difference is that this time the southern side will be additionally secured by the weekly PP at 1.1881. Similarly to the previous trading day, it might break to the bottom. But, in any case, the fall is not expected to go below the 1.1840-50 mark, as it represents a location of the dominant ascending channel's lower trend-line.

The EUR/USD currency pair confirmed an upward trend on Thursday, as the US economic reports failed to provide sufficient support for the Greenback. The Euro gained 0.17% against the US Dollar to continue a side move above the 1.1890 mark until the Friday morning session. The National Association of Realtors revealed that pending home sales in the United States fell 0.8% over the month of July, as the property market kept facing hurdles form a limited supply of available houses, which pushed prices up. The report suggested that sales would not break out in the coming months, as inventories are unlikely to improve significantly, while higher property prices are set to continue outpacing wage growth further, causing more strains on first-time buyers.

The Canadian Dollar strengthened significantly against its American counterpart as the GDP report showed stronger-than-anticipated figures. The USD/CAD pair dropped by 83 base points or 66% to reach the 1.2568 level and continued its gradual decline. Statistics Canada announced that the country's GDP expanded at a 4.5% annualised pace in the June quarter, beating forecasts for a 3.7% increase. The main contributors to growth were broad-based increases in consumer spending, exports and business investment. Strong figures marked Canada as the best performer amongst the G7, suggesting higher chances that the Bank of Canada would continue to raise key interest rate this year.

EUR/CHF posted little gains today and tries to stay in the buyer’s territory, but I don’t know if will be possible after the false breakout above the WL4. Has come down to retest the WL2 and maintains a bullish bias as long as stays above this level. Will increase further only if will stabilize above the WL4 and if it will retest the upper median line (uml) of te minor ascending pitchfork.

Price is trading in the red and tries to resume the corrective phase. Price squeezed a little in the US session and recovered after the massive drop. NZD/USD is trading near the 0.7150 level and looks determined to breakdown below the down sloping line (dotted line), which will confirm a further drop. Technically is expected to drop more than 300 pips after the breakdown below the Head and Shoulders neckline.

USD/JPY increased a little today and tries to recover after the yesterday’s drop. Continues to move sideways on the short term, so is better to stay away until we’ll have a clear direction and a fresh trading signal. I believe that we’ll have a clear direction in the upcoming days as the United States data will have a big influence.

Price increased as the USD was driven higher by the USDX’s rebound, the index failed to reach the near term support from 92.55 and from 92.49 level. A USDX’s accumulation will signal a broader rebound, but we have to be patient to see what the US data will bring in the afternoon.

The USD will dominate the currency market again if the United States will impress later, but I want to remind you that another disappointment will ruin any upside perspective.

Price continues to be trapped between the 23.6% and the 50% Fibonacci levels, has broken above the warning line (wl1), but this could be a false breakout. Is pressuring the warning line (wl1), but technically seems too overbought to resume the upside movement and could drop towards the 50% retracement level again.

The United States data will shake the markets, not only the USD/JPY pair, you should be careful because this will be a crucial day for the greenback. Some good numbers will force the FED to think at another rate hike till the end of the year.