Friday was finally the day the USD found some bidders following better than expected labour market data. The NFP print saw the USD index rally over 1% on the day and the reaction was typical of a market that is heavily short dollar faced with strong data, in fact the USD index had one of its best days of 2017. We have been highlighting the USD sentiment was reaching lows and while the greenback certainly still remains vulnerable, it is technically still facing oversold conditions and further gains would not be ruled out.
The biggest movers were the likes of EURUSD and GBPUSD where we have seen close to 10% losses for the USD since the beginning of April, GBPUSD has traded back to 1.3050 support where we highlighted on Thursday, with EURUSD dropping back from above 1.1900 to as low as 1.1728 on Friday. Broader risk appetite was mixed, European stocks traded lower while in the US stocks were slightly higher on the day. However aside from the Dow which closed a record highs once again, other indices retreated into the close.
There is plenty to keep a close eye in coming weeks and while markets tends to be quiet, the geopolitical environment is anything but. The weekend provided us with plenty of thematic headlines, from Brexit settlement talks/denials, North Korean sanctions, China/US trade agreements and the US investigation into Russian interference in the elections.
It’s a light enough calendar today with nothing major of note from the economic release front, however we will be looking stateside to a number of Fed speakers due to cross the wires. Given the firmer USD over the weekend, anything remotely supportive of another rate hike this year could see the dollar take another leg higher. EURUSD will be looking at support back towards 1.1725, while 1.1610 area would be the next major level below. Upside obviously will be targeting back to highs above 1.1900 but on the way higher 1.1825 should offer first resistance. We have seen GBPUSD drop below the 21 day moving average for the first time since June and with the move back below 1.3050 we see 1.3005 as first support. While 1.2930 offers firmer support for GBP buyers to re-emerge. EURGBP will be looking towards topside resistance above .9050, a break there targets .9080 and .9142 while any downside will run into support around .8975/95 area, with .8907 below that.