EURUSD defends post-ECB gains as US Dollar drops ahead of US employment clues

The risk complex remains slightly positive as the latest Fed bets suggest sooner rate cuts and economic prospects surrounding China improve. Also favoring the sentiment could be an absence of risk-negative headlines from China and the Middle East. However, anxiety ahead of today’s employment data from the US, Europe, and Canada restricts the market movement.

With this, the US Dollar Index remains pressured while the riskier assets like Antipodeans and commodities edge higher. That said, EURUSD defends the post-European Central Bank (ECB) action gains despite lacking upside momentum on the intraday whereas the GBPUSD retreats. It should be observed that the ECB matched market forecasts of announcing a 0.25% cut to its benchmark rates but the policy statement and President Christine Lagarde’s press conference pushed back any sooner rate cuts and fuelled the Euro.

USDJPY traces downbeat yields and eyes the first weekly loss in three whereas USDCAD struggles to justify upbeat Oil prices amid the Bank of Canada’s (BoC) rate reduction. Further, AUDUSD and NZDUSD cheer China headlines and slightly upbeat data/events at home but fail to portray a major upside as market players anticipate further rate cuts from the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ).

Gold stays on the bull’s radar while snapping a two-week losing streak. In contrast, Crude Oil pares the weekly losses even as intraday traders appear skeptical after a two-day recovery, especially ahead of today’s key US data.

BTCUSD and ETHUSD failed to cheer the US Dollar’s weakness, as well as the news suggesting a 50% jump in the active users of the Ethereum ecosystem. The reason could be linked to the US SEC’s doubts about unleashing the ETH ETF launch soon.

Following are the latest moves of the key assets:

• WTI Crude oil lacks upside momentum around $75.60 after a two-day rebound from the lowest level in four months.
• Gold seesaws at a fortnight high, struggles for clear directions near $2,375 by the press time.
• The USD Index holds lower ground near 104.00, on the way to a second consecutive weekly loss.
• Wall Street mixed but the Asia-Pacific shares edged higher. That said, British and European shares trade mixed during the initial trading hour.
• BTCUSD and ETHUSD both pare the previous day’s losses around $71,300 and $3,820 as we write.

US Dollar stays pressured on Fed bets, cautious optimism…

Be it the mostly unimpressive employment and wage growth clues from the US or the European Central Bank’s (ECB) hawkish cut, the US Dollar justified all while declining on Thursday. With this, the US Dollar Index (DXY) snapped a two-day winning streak and brace for the second consecutive weekly loss, which in turn allowed the Euro to better cheer the receding odds of the ECB’s future rate cuts while the Pound ignores doubts about the UK’s economic soundness. Further, the risk-on mood and pro-China catalysts allowed the commodities and Antipodeans to remain firmer but the BTCUSD and ETHUSD struggled with mixed factors despite staying on the way to post a weekly run-up.

Earlier in the day, China’s Trade Balance for May showed improvement in trade surplus, both in CNY terms and in USD terms, while the preliminary readings of Japan’s Coincident Index and Leading Economic Index for April printed mixed data. Despite the mixed data, the recent increase in the odds favoring the Fed’s rate cut in September, followed by two such actions in 2024, underpin the market’s positive mood and propel prices of the commodities and Antipodeans.

With this, EURUSD appears all set to print a two-week uptrend as most of the ECB speakers pushed back the idea of frequent rate cuts. On the other hand, GBPUSD prepares for a four-week winning streak even as the Aussie central bankers flag fears about the UK’s economic transition. Further, USDJPY remains on the way to snapping a two-week uptrend despite being lackluster on a day.

The upbeat sentiment, upbeat China data, and hawkish comments from Reserve Bank of Australia’s (RBA) Deputy Governor Andrew Hauser help AUDUSD to defend the previous day’s run-up and brace for the second weekly gains. On the same line was NZDUSD which remains firmer amid the risk-positive catalysts and upbeat Q1 Manufacturing Sales. It should be noted that the price-positive environment for the commodities and Antipodeans failed to inspire the USDCAD traders due to the Bank of Canada’s (BoC) rate cut and anxiety ahead of today’s employment data from the US and Canada.

Gold eyes the first weekly gain in three while approaching the $2,400 hurdle ahead of the key US jobs report. The precious metal’s latest gains could be linked to the US Dollar’s weakness, the market’s confidence in the riskier assets, and the cautious optimism about China. Crude oil also followed suit and ignored a draw in the weekly stockpiles while also justifying the OPEC+ extension of supply cuts.

• 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

Employment, central bank catalysts eyed…

Apart from the employment data from Europe, Canada, and the US, a speech from ECB President Christine Lagarde will also be important to watch for directions. That said, the final reading of the EU Q1 2024 GDP adds to the economic calendar and will keep traders busy.

Talking about the US jobs report, the expected improvement in the headline Nonfarm Payrolls (NFP), from 175K to 185K, and Average Hourly Earnings to 0.3% from 0.2%, could help the US Dollar pare the weekly losses in case of posting upbeat outcomes. However, any negative surprises will bolster the latest dovish Fed bets and push the Greenback toward the biggest weekly losses since mid-May.

Elsewhere, EURUSD may witness a corrective pullback in case of mixed employment and growth numbers, as well as due to ECB President Lagarde’s failure to defend the latest hawkish bias. However, the US catalysts will be more important to watch for the day.

USDCAD is likely to pare the weekly gains on firmer Oil prices, Canada’s main export, but downbeat prints of Canada employment data and Bank of Canada’s (BoC) rate cut favor the Loonie pair buyers unless the US Dollar disappoints buyers.

May the trading luck be with you!