EURUSD braces for weekly loss despite sluggish US Dollar ahead of NFP

Market sentiment sours amid doubts about the US soft landing and geopolitical tensions in the Middle East. Also weighing on the risk profile could be the cautious mood ahead of today’s US employment data for July. It’s worth noting that the risk-off mood allowed the US Dollar Index (DXY) to recover from a fortnight low while snapping a two-day losing streak. However, there was a mixed reaction to the USD’s rebound as concerns about the US Federal Reserve’s (Fed) rate cuts gained acceptance.

Amid these plays, the DXY braces for a neutral weekly closing but EURUSD, GBPUSD, AUDUSD, and USDCAD remain on the way to posting a heavy weekly loss. Alternatively, NZDUSD, USDCHF, USDJPY, Crude Oil, and Gold stayed strongly positive for a week.

Not only some of the major currencies but benchmark US equity indices and cryptocurrencies also failed to cheer the softer US Dollar, as well as the dovish bias about the Fed. That said, the Dow Jones Industrial Average Index (DJI30) braces for the first weekly loss in five whereas Nasdaq 100 stays pressured for the third consecutive week. Meanwhile, BTCUSD and ETHUSD also hold lower grounds amid fears of heavy outflows from the ETFs and the dumping of major whales.

Following are the latest moves of the key assets:

• WTI Crude oil picks up bids to reverse the previous day’s retreat from a fortnight high, mildly positive near $77.00 by the press time.
• Gold rises to the highest level in two weeks, up 0.90% intraday to $2,469 at the latest.
• The USD Index struggles to defend the previous day’s rebound from a two-week low, mildly offered near 104.20 as we write.
• Wall Street closed with mild losses while the Asia-Pacific shares edged lower. Further, equities in Britain and Europe print minor losses during the initial trading hour.
• BTCUSD and ETHUSD both drop more than 1.5% intraday to around $64,200 and $3,150 at the latest.

US Dollar pares losses amid mixed catalysts…

On Thursday, the US Dollar marked the biggest jump in a week as the downbeat US employment clues and softer PMIs renewed concerns about the US soft landing. The same, however, triggered the market’s risk-off mood and underpinned demand for haven assets like the US Dollar, Japanese Yen (JPY), Swiss Franc (CHF) and Gold. Apart from the mostly downbeat US data, geopolitical fears emanating from the Middle East and the US also weighed the sentiment and favored the less risky assets.

Among the key geopolitical woes, Iran-backed Hezbollah’s readiness to take revenge for Israel strikes and the US-China tensions gained major attention. On the same line was the news suggesting a gathering of huge storms in the Gulf of Mexico.

With this, Crude Oil manages to ignore the US Dollar’s corrective bounce and China's woes to brace for the first weekly gain in four. The black gold’s run-up could be linked to the Middle East woes and the OPEC’s indecision about the supply cuts. Further, Gold eyes the biggest weekly gain since early April. Moreover, USDCHF drops to a six-month low while declining for the fifth consecutive week whereas USDJPY also remains pressured at the lowest level since early March as the risk-aversion and softer US Dollar joins Japanese policymakers’ optimism about the economic transition.

Elsewhere, unimpressive comments from the European Central Bank (ECB) officials and mixed data from the Eurozone exert downside pressure on the EURUSD prices. On the same line, the Bank of England’s (BoE) rate cut and readiness to act accordingly in the future kept the GBPUSD on the bear’s radar. It should be noted that the USDCAD fails to justify upbeat prices of Canada’s main export item, namely Crude oil, amid dovish bias about the Bank of Canada (BoC) whereas NZDUSD benefits from the market’s expectations support a delay in the Reserve Bank of New Zealand’s (RBNZ) rate cut. Meanwhile, AUDUSD bears the burden of China woes and mostly downbeat data at home, not to forget the risk-off mood.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

Swiss Inflation, US employment in the spotlight…

Looking forward, all eyes will be on the US employment details for July, especially on the headline Nonfarm Payrolls (NFP) data. The US job reports become more important this time as markets have renewed concerns about the Fed’s three rate cuts in 2024 versus the previously anticipated two. Hence, the US Dollar bears should be ready for further gains in case of downbeat NFP and/or wage growth. As per the market consensus, the headline NFP is expected to ease to 175K from 206K while the Unemployment Rate is likely to remain unchanged at 4.1%. Further, the Average Hourly Earnings might ease to 3.7% YoY from 3.9% but the MoM figures are expected to stay unchanged at 0.3%.

Apart from the US employment clues, the Swiss Consumer Price Index (CPI) for July, also known as the headline inflation gauge for Switzerland, will also entertain momentum traders, especially those like the Swiss Franc (CHF) pairs. That said, the headline CPI YoY is expected to remain unchanged at 1.3%, but the MoM figure will likely deteriorate to -0.2% from 0.0% prior, which if confirmed might challenge the USDCHF sellers at a six-month low.

May the trading luck be with you!