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Despite the volatility caused by the publication of the monthly US employment data, the yellow metal's price continues to surge in the borders of a channel-up pattern. However, it was spotted on Monday that the 1,795.00 level was providing the price with resistance.

In the case that the price gains enough support from the lower trend line of the channel up the pattern and possibly the 55-hour simple moving average it could reach the resistance of the 1,800.00 marks.

On the other hand, a potential decline below the 55-hour SMA and the pattern's lower trend line would most likely look for support in the 100 and 200-hour simple moving averages near 1,775.00.

The greenback weakened on Friday and stabilised somewhat during the Asian session today, as the US employment report for June tended to disappoint traders, as the NFP figure rose but the unemployment rate rose as well, while trader's attention turns to the release of the Fed's latest meeting minutes. The Aussie after the recent strengthening seems to turn its attention to the release of RBA's interest rate decision tomorrow, as the bank on the one hand is expected to remain on hold, yet may signal a change in regards of its QE program. The GBP gained against the USD, despite BoE Governor Bailey's dovish comments, as the Governor highlighted the importance of not prematurely tightening the bank's monetary policy. Gold rose benefitting from the USD weakness caused by the US employment report for June on Friday and entered the green territory for a third consecutive day. US stocks on Friday were supported reaching new record high levels as all three main US stock indexes were in the greens, encouraged from the prospect of the monetary policy tightening being delayed. Oil prices fell below $75 per barrel on Monday, as there seems to be a deadlock among OPEC+ members and some key players seem willing to increase production levels, in order to protect their market share.

AUD/USD benefitted from USD's weakening on Friday yet seems to have reached a ceiling at the 0.7530 (R1) resistance line. We tend to maintain a bias for a sideways motion around the 0.7530 (R1) resistance line given also that the RSI indicator below our 4-hour chart is at the reading of 50. Should the bulls take over we may see the pair breaking the 0.7530 (R1) resistance line which was tested yesterday but also on the 21st of June and aim for the 0.7595 (R2) level. Should the bears prevail, we may see AUD/USD breaking the 0.7465 (S1) support line and start aiming for lower grounds, which could signal a return to low levels not seen for the pair since the early days of December last year.

On the other hand, the Japanese currency also tended to benefit from USD's weakening as USD/JPY dropped, testing yet not breaking the 110.90 (S1) support line. Given the pair's relative stabilisation during today's Asian session, we tend to keep a bias for a sideways motion currently, in anticipation for the direction of the pair's next leg. Should buyers be in control of the pair's direction, we may see it breaking the 111.70 (R1) resistance line and aim for the 112.25 (R2) resistance level. Should the market display a selling interest for the pair, we may see it breaking the 110.90 (S1) support line and aim for the 109.95 (S2) support level which was tested on the 16th and 21st of June.

Other economic highlights today and the following Asian session:

Today among others we note Turkey's CPI rates for June and UK's and France's final services PMI for June as well as the final composite PMI figure for the Eurozone of the same month. Please note that ECB Vice President De Guindos is scheduled to speak. During tomorrow's late Asian session we get from Australia, RBA's interest rate decision.

As for the rest of the week

On Tuesday, we note Germany's industrial orders for May, Germany's ZEW indicators for July and the US Markit and ISM services PMIs for June. On Wednesday, we get Germany's industrial output for May, UK's Halifax House prices for June and Norway's GDP rates for May, while the Fed releases the minutes of its latest meeting. On Thursday, we get Japan's current account balance for May and the weekly US initial jobless claims figure. On Friday, we highlight China's inflation measures for June, UK's GDP rates for May, Norway's CPI rates for June and Canada's employment data for June.

AUD/USD H4 Chart

Support: 0.7465 (S1), 0.7400 (S2), 0.7335 (S3)
Resistance: 0.7530 (R1), 0.7595 (R2), 0.7665 (R3)

USD/JPY H4 Chart

Support: 0.7465 (S1), 0.7400 (S2), 0.7335 (S3)
Resistance: 0.7530 (R1), 0.7595 (R2), 0.7665 (R3)

Gold price found support near the $1,750 zone and it started a fresh increase against the US Dollar. The price broke the $1,765 resistance zone to move into a short-term positive zone.

There was a clear break above the $1,780 level and 50 hourly simple moving average. The price traded as high as $1,795 and it is now consolidating gains. On the downside, there is a key bullish trend line forming with support near $1,785 on the hourly chart.

On the upside, an initial resistance is near the $1,795 level. The main resistance is now forming near the $1,800 level, above which the price is likely to accelerate higher in the near term.

On the downside, an initial support is near the $1,785 level. The next major support is near the $1,765 level, below which the price is likely to extend its decline towards $1,750 on FXOpen.

Notes/Observations

• European PMI Services data shows further momentum building as a continued easing of virus-related restrictions occurs (Beats: Euro Zone, France, Italy, Spain; Misses: Germany)
• US market closed Monday in observance of the 4th of July.
• Focus on the release of FOMC Minutes on Wed.

Asia

• China Jun Caixin PMI Service registered its 14th consecutive expansion but lowest since Apr 2020 (50.3 v 54.9e).
• Japan Jun Final PMI Services: 48.0 v 47.2 prelim (confirms 17th month of contraction).
• Australia Jun Final PMI Services: 56.8 v 56.0 prelim (confirms 10th month of expansion).
• Australia May Final Retail Sales M/M: 0.4% v 0.1% prelim.
• BOJ Gov Kuroda reiterated that would closely monitor the impact of COVID and not hesitate to take additional easing measures if necessary.

Europe

• ECB chief Lagarde reiterated the stance that recovery was still fragile. Reiterated Council stance that to maintain its Pandemic bond-buying program (PEPP) until at least March 2022 or until the coronavirus crisis phase was over.
• ECB's Schnabel (Germany) stated that was necessary to see inflation overshoot ECB target on a temporary basis, while the economy recovered.
• Germany Econ Min Altmaier stated that he did not support joint debt issuance but not totally dismissing the idea. Would take some years to spend the €750B debt we currently have.
• France Treasury Chief Economist Benassy-Quere stated that the domestic economy was experiencing a very steep rebound but problems remained.

Americas

• Various global companies said to have been attacked by ransomware over the weekend. The situation said to have been made worse in the US by reduced staff for the 4th of July holiday.
• White House to begin assistance to the ~200 companies hit by cyber and ransomware attacks.

Energy

• OPEC+ talks have been extended into Monday as UAE said to maintain its position of not supporting the extension of production agreement into 2022.
• Saudi Energy Min Abdulaziz noted that the Russian proposal was acceptable to everyone except the UAE. Stressed that there should be an output production increase to meet the expecting fall in oil during the summer.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -0.04% at 456.64, FTSE +0.15% at 7,133.87, DAX -0.32% at 15,600.15, CAC-40 -0.09% at 6,547.14, IBEX-35 -0.03% at 8,905.00, FTSE MIB +0.14% at 25,317.50, SMI -0.37% at 11,920.78, S&P 500 Futures -0.10%]

Market Focal Points/Key Themes: European indices open modestly lower in light trading and failed to gain direction as the session wore on; better-performing sectors include consumer discretionary and industrials; underperformers include financials and health care; US closed for the holiday, along with Czechia, Slovakia, and Colombia; Apollo confirms is considering offer for Morrisons; MetLife sells operations in Poland and Greece to NNl; no major earnings expected through rest of trading session.

Equities

• Consumer discretionary: WM Morrison [MRW.UK] +11% (offers).
• Industrials: Porvair [PRV.UK] -2% (earnings).
• Technology: Ultra Electronics [ULE.UK] +2% (trading update), Restore [RST.UK] +2% (trading update).

Speakers

• Swedish Central Party said to allow Sweden's resigned PM Lofven to form a new government.
• Singapore Fin Min Wong stated that its FY21/22 budget position remained expansionary. Maintained budget deficit forecast at S$11.0B; equates to 2.2% of GDP.

Currencies/Fixed Income

• EUR/USD drifted higher in dull trading as European PMI Services data showed further momentum building as a continued easing of virus-related restrictions occurred. Dealers looking ahead to Wed’s release of FOMC Minutes as markets believing that the outlook for inflation is uncertain while Fed members see it as transitory. Pair at 1.1870 by mid-session.
• Turkey Jun CPI data was higher than expected. Dealers noted that the rise in inflation along with signs of a strong rebound in economic activity meant an interest rate cut looked unlikely in the next couple of months.

Economic data

• (UK) Jun Official Reserves Changes: -$2.2B v +$1.5B prior.
• (RU) Russia Jun PMI Services: 56.5 v 55.8e (6th straight expansion); PMI Composite: 55.0 v 56.2 prior.
• (SE) Sweden Jun PMI Services: 67.4 v 71.3 prior (13th month of expansion); PMI Composite: 66.9 v 69.8 prior.
• (FR) France May Industrial Production M/M:-0.3% v +0.8%e; Y/Y: 20.5% v 21.7%e.
• (FR) France May Manufacturing Production M/M: -0.5% v -0.1% prior, Y/Y: 22.3% v 26.0%e.
• (TR) Turkey Jun CPI M/M: 1.9% v 1.4%e; Y/Y: 17.5% v 16.8%e; CPI Core Index Y/Y: 17.5% v 16.9%e.
• (TR) Turkey Jun PPI M/M: 4.0% v 2.9%e; Y/Y: 42.9% v 41.4%e.
• (ES) Spain Jun Services PMI: 62.5 v 60.6e(3rd month of expansion and highest since Mar 2000)); Composite PMI: 62.4 v 60.5e.
• (ZA) South Africa Jun PMI (whole economy): 51.0 v 53.2 prior (9th month of expansion).
• (IT) Italy Jun Services PMI: 56.7 v 56.2e(2nd straight expansion and highest since Jan 2018)); Composite PMI: 58.3 v 58.0e.
• (FR) France Jun Final Services PMI: 57.8 v 54.7e(confirmed 3rd straight expansion); Composite PMI: 57.4 v 57.1e.
• (DE) Germany Jun Final Services PMI: 57.5 v 58.1e(confirmed 2nd month of expansion and highest since Mar 2011); Composite PMI: 60.1 v 60.4e.
• (EU) Euro Zone Jun Final Services PMI: 58.3 v 58.0e (confirmed 3rd straight expansion and highest since Jun 2007)); Composite PMI: 59.5 v 59.2e.
• (CH) Swiss weekly Total Sight Deposits (CHF): 712.1B v 712.5B prior; Domestic Sight Deposits: 632.8B v 631.0B prior.
• (UK) Jun New Car Registrations Y/Y: 28.0% v 674.1% prior.
• (TW) Taiwan Jun Foreign Reserves: $543.3B v $543.0B prior.
• (EU) Euro Zone July Sentix Investor Confidence: 29.8 v 30.0e.
• (UK) Jun Final Services PMI: 62.4 v 61.7e (confirms 4th month of expansion); Composite PMI: 62.2 v 61.7e.

Fixed income Issuance

• (EU) EFSF opened its book to sell EUR-denominated 0% Jan 2031 bond; guidance saw -3bps to mid-swaps.

Looking Ahead

• (IE) Ireland Debt Agency (NTMA) announces details for upcoming bond issuance (Thurs).
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (DE) Germany to sell combined €6.0B in 3-month and 9-month BuBills.
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.5-3.5B in 3-month Bills.
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).
• 06:00 (IL) Israel to sell bonds.
• 06:00 (RO) Romania to sell RON575M in 4.15% 2030 Bonds.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (MX) Mexico Jun Consumer Confidence: No est v 42.7 prior.
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (ES) Spain Debt Agency (Tesoro) announces details of upcoming issuance.
• 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).
• 09:00 (BR) Brazil Jun PMI Services: No est v 48.3 prior; PMI Composite: No est v 49.2 prior.
• 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%.
• 09:00 (FR) France Debt Agency (AFT) to sell €5.1-6.3B in 3-month, 6-month, and 12-month bills.
• 09:45 (EU) ECB weekly QE bond-buying update.
• 10:30 (CA) Bank of Canada Q2 Overall Business Outlook Survey: No est v 2.9 prior; Business Outlook Future Sales: No est v 52 prior.
• 13:00 (ES) ECB’s de Guindos (Spain).
• 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 112.2 prior.
• 19:30 (JP) Japan May Labor Cash Earnings Y/Y: 2.1%e v 1.4% prior (revised from 1.6%); Real Cash Earnings Y/Y: 2.4%e v 1.9% prior (revised from 2.1).
• 19:30 (JP) Japan May Household Spending Y/Y: No est v 13.0% prior.
• 20:30 (HK) Hong Kong Jun PMI (whole economy): No est v 52.5 prior.
• 21:00 (PH) Philippines Jun CPI Y/Y: 4.3%e v 4.5% prior.
• 23:30 (HK) Hong Kong to sell 3-month, 6-month and 12-month Bills.
• 23:35 (JP) Japan to sell 30-Year JGB Bonds.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.1849
Prev Close: 1.1864
% chg. over the last day: +0.12%

The EUR/USD currency pair began to show the first signs of a reversal. Friday's labor market data showed a better-than-expected figure, but the unemployment rate remained high. On this background, the dollar index corrected lower, which played in favor of a slight strengthening of the European currency.

Trading recommendations

Support levels: 1.1847, 1.1809
Resistance levels: 1.1911, 1.1973, 1.2002, 1.2050, 1.2109, 1.2144, 1.2174, 1.2212

The trend is still bearish. The price is traded near the support level of 1.1847. However, the buyers showed initiative. Given the divergence on the MACD indicator, traders are better to look for buy trades from the support levels, but only on intraday timeframes. There is no optimal entry point for short positions now.

Alternative scenario: if the price breaks out through the 1.1972 resistance level and fixes above, the general uptrend is likely to be resumed.

News feed for 2021.07.05:

• Eurozone Service PMI (m/m) at 11:00 (GMT+3).

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.3760
Prev Close: 1.3818
% chg. over the last day: +0.42%

The GBP/USD currency pair increased by 0.42% on Friday. The British currency looks more confident than the euro, even though there are still strict restrictions in the United Kingdom due to the outbreak of the Delta coronavirus.

Trading recommendations

Support levels: 1.3767
Resistance levels: 1.3935, 1.4002, 1.4075, 1.4101, 1.4138, 1.4191

The GBP/USD trend is bearish on the H1 timeframe. The price is trading below the moving average, but there is an initiative from the buyers' side, and the MACD indicator has returned to the positive zone. Under such market conditions, traders are better to look for both sell trades from the resistance levels and buy trades from the support levels on the intraday timeframes.

Alternative scenario: if the price breaks out through the 1.3922 resistance level and consolidates above, the bearish scenario is likely to be canceled.

News feed for 2021.07.05:

• UK Service PMI (m/m) at 11:30 (GMT+3).

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 111.49
Prev Close: 111.01
% chg. over the last day: -0.43%

The USD/JPY currency pair corrected lower on Friday amid a drop in the dollar index. The price reached the 111.06 support level, where the buyers managed to defend their positions. A breakdown of 111.06 will open the road to the next support level of 110.73.

Trading recommendations

Support levels: 111.06, 111.48, 110.73, 110.47, 109.83, 109.62, 109.31
Resistance levels: 112.18

The trend remains bullish. The price is trading above the moving average. But the MACD indicator falls below zero. Under such market conditions, traders are better to look for buy trades from the support levels. There is no optimal entry point for short positions right now.

Alternative scenario: if the price falls below 110.47, the general downtrend is likely to be resumed.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2439
Prev Close: 1.2318
% chg. over the last day: -0.98%

The USD/CAD currency pair decreased by 0.98% by the end of the day. The quotes of USD/CAD are highly dependent on two factors: the dollar index and oil prices, as the Canadian dollar is a commodity currency. On Friday, the dollar index fell sharply, and as a result, the USD/CAD quotes went down against the backdrop of rising oil prices.

Trading recommendations

Support levels: 1.2312, 1.2251, 1.2190, 1,2148 1.2121, 1.2096
Resistance levels: 1.2347, 1.2404, 1.2478, 1.2519

Technically, the trend remains bullish. But the price is trading below the moving average now. The MACD indicator is in the negative zone, with no signs of reversal. Under such market conditions, it is best to trade on lower timeframes. Buyers may look for buy trades from the support levels. Traders can look for entry points on intraday timeframes for sell positions, but only with short targets because it is trading against the trend.

Alternative scenario: if the price breaks down through the 1.2260 support level and fixes below, the downtrend is likely to be resumed.

• US dollar takes some damage, equities hit new records after US jobs data
• Oil prices remain elevated amid OPEC divisions, talks continue today
• Aussie dollar braces for crucial RBA meeting early on Tuesday

Nonfarm payrolls hit the sweet spot

The US employment report left markets spinning on Friday. While nonfarm payrolls overcame expectations by a solid margin, the unemployment rate paradoxically rose a touch, baffling traders and sparking a fresh round of volatility in most assets. The two numbers come from different surveys, so they don’t always move in lockstep.

Investors ultimately reached the verdict that this employment report was the best of all worlds - strong, but not strong enough to force the Fed to take its foot off the accelerator straight away. This saw the market price out some Fed tightening risk, with the dollar and Treasury yields getting knocked down while stocks powered to new record highs.

Of course, all this might be wishful thinking. This jobs report wasn’t sizzling hot, but it was still more than solid. The U6 under-employment rate fell substantially. With the US economy overflowing with open jobs and the beefed-up unemployment benefits having already expired in many huge states like Texas and Florida, next month’s jobs report could be scorching hot.

Where does this leave the dollar? In a nutshell, this retreat might be just a bump in the road. The labor market recovery will likely accelerate, the Biden administration is committed to raising real wages, and inflation might not cool quickly if rents go wild once the eviction moratorium expires this month. All this argues for the Fed to dial down its asset purchases soon, which spells upside risks for the dollar against low-yielding currencies like the yen.

OPEC meeting drags on as producers can’t agree

Over in energy markets, OPEC and its allies failed to agree on a path forward for production increases last week. The negotiations will continue today. Most members want to raise supply by a total of 2 million barrels by year-end, but the United Arab Emirates is blocking this proposal, seeking better terms for itself.

Some compromise will most likely be reached soon, as the stakes are too high. Nobody wants to return to the ‘pump at will’ regime that prevailed early last year, as that would damage both revenues and market stability. Judging by the fact that oil prices remain elevated, investors seem to agree.

All told, oil prices have been trading like a runaway train lately, but it’s becoming harder to envision massive gains from here. More supply is coming back online both from OPEC and US shale producers, while the demand outlook is looking shaky with the Delta covid variant spreading like wildfire.

RBA - Half measures?

The next event to inject some volatility into the FX arena will be the Reserve Bank of Australia meeting early on Tuesday. It will be a tricky one. On the bright side, the Australian economy is doing phenomenally well. The unemployment rate reached pre-pandemic lows in May already, the housing market is booming, and the prices of commodities that Australia exports are high.

The catch is that half the country is now back in a lockdown after new clusters of infections popped up, and vaccinations have been slow.

Until recently it looked like the RBA would move towards exiting cheap money, but with the latest lockdowns, it might resort to ‘half measures’. It could adopt a more flexible approach to its bond purchases, which would essentially be a tapering move, but stress that it doesn’t expect to raise rates for a long time still, negating any massive rally in the aussie.

US markets will remain closed today for Independence Day, so liquidity will be thinner than usual, making sharp market moves possible without much news behind them.

Cable extends fresh bullish mode into second day, lifted by post-NFP profit-taking on dollar’s long positions, as well as news on a battle for Britain’s fourth largest supermarket group Morrisons.

The sentiment is additionally boosted by expectations that the UK government may completely lift restrictive measures on July 19 Improving daily studies support the action as 14-d momentum turned north after forming bullish divergence and stochastic is rallying higher after reversal from oversold territory.

Fresh bulls broke above Fibo 38.2% of 1.4001/1.3731 bear-leg, with daily close above here to generate initial reversal signal, which would be verified on sustained break above 10DMA (1.3869). Solid support at 1.3800 zone (converging 10/20 period MA’s on 4-hr chart) needs to hold dips and keep bulls in play.

Res: 1.3869, 1.3897, 1.3937, 1.3948.
Sup: 1.3818, 1.3800, 1.3786, 1.3731.

UK PMI Services was finalized at 62.4 in June, down slightly from May's 62.9. That's still the second-highest reading since October 2013. PMI Composite dropped to 62.2, down from 62.9. That's also the second-highest reading since January 1998.

Tim Moore, Economics Director at IHS Markit: "The service sector recovery remained in full swing during June as looser pandemic restrictions released pent up demand for business and consumer services. Sales growth eased slightly from May's recent peak, but capacity constraints and staff shortages meant that many service providers struggled to keep up with new orders...

"The latest survey data highlighted survey-record rates of input cost and prices charged inflation across the service sector, reflecting higher commodity prices, transport shortages and staff wages. Imbalanced supply and demand was the main driver, while the roll-back of pandemic discounting by some service providers amplified the latest round of price hikes."

Full release here.

Eurozone Sentix Investor Confidence rose to 29.8 in July, up from 28.1, but missed expectation of 30.2. Nonetheless, it's still the 5th increase in a row, and highest since February 2018. Current situation index rose from 21.3 to 29.8, 5th increase in a row, and highest since October 2018. Expectations index, however, dropped from 35.3 to 29.8, lowest since December 2020.

Sentix said, "the result is impressive" but, "we are approaching a certain point of maximum momentum in the short term" as expectations dropped. "For the economy as a whole, this is not yet a worrying decline. For the equity markets, on the other hand, which are very much focused on investor expectations, this development could contribute to increased market volatility."

It added, "in this environment, the ECB remains in focus. So far, there is no sign of a turn away from the expansive monetary policy. However, the inflation barometer, which remains clearly in negative territory at -38.25, underscores the danger of further rising inflation rates in a globally increasingly synchronised, strong economic upswing."

Full release here.

EURUSD opened the week on a neutral note, keeping its footing around the 1.1845 level and near June’s lows despite inching to a three-month low of 1.1806 on Friday.

Trend signals remain daunting as the price continues to trade comfortably below its simple moving averages (SMAs) and under the Ichimoku cloud, which proved to be a tough resistance area to overcome last week. The negative cross between the 20- and 50-day SMAs is further dashing any hopes for trend improvement.

As regards the market momentum, some optimism seems to be building over an upside correction as the RSI has paused its downtrend around the 30 oversold level and the Stochastics have created a higher low to exit their oversold territory.

In the event the bulls take control, the 61.8% Fibonacci of the 1.1703 – 1.2265 up leg at 1.1882, where the restrictive red Tenkan-sen line is currently hovering, will come first into view. A violation at this point may see another challenging battle around the cloud’s bottom line and near the 50% Fibonacci of 1.1984. If buyers claim that zone this time, the 38.2% Fibonacci of 1.2050 could immediately add some downside pressure, deterring a continuation towards the 23.6% Fibonacci of 1.2132 and the cloud’s upper boundary seen at 1.2160.

Should the bears dominate, driving the price below the 1.1800 number, the spotlight will shift to the crucial 5-month low of 1.1703, where any step lower will put the pair in a bearish position in the medium-term picture. The long-term outlook will also face a deterioration if the decline extends below the 1.1600 mark.

In brief, although EURUSD continues to face unfavorable trend signals, the odds for an upturn seem to be growing, with the confirmation expected to come above 1.1882.

EURUSD bears take a breather after 3-month low