04-Jun-2021

1) XAU/USD Bears Turn Cautious Near Ascending Trend-Line, NFP Awaited
2) NZD/USD Clings To Modest Gains Above Mid-0.7100s, Lacks Follow-Through
3) EUR/USD Struggles Around 1.21 As Dollar Holds Gains Ahead Of Nonfarm Payrolls
4) GBP/USD Rebounds From Near Three-Week Lows, Steadily Climbs Back To 1.4120 Area
5) USD/CAD Sits Near One-Week Tops, Around 1.2125 Ahead Of US/Canadian Jobs Report

 

 

1) XAU/USD Bears Turn Cautious Near Ascending Trend-Line, NFP Awaited

Gold witnessed a dramatic turnaround from the highest level since January and tumbled around 2% on Thursday amid resurgent US dollar demand. The incoming positive economic data indicated that the US recovery is gathering pace and fueled speculations about a potential pullback of stimulus measures. This, in turn, forced investors to unwind their USD bearish bets, which, in turn, weighed heavily on dollar-denominated commodities, including gold. The USD buying interest picked up pace following the release of upbeat US macro releases.

The ADP report showed that the US private-sector employers added 978K new jobs in May. This was well above consensus estimates pointing to a reading of 650K and marked the biggest increase since June 2020. Adding to this, the US Initial Weekly Jobless Claims fell more than anticipated, to 385K during the week ended May 28 from the 405K previous. Separately, the US ISM Services PMI also surpassed market expectations and touched another record high level of 64.0 in May, highlighting the ramp-up in business activity across the economy.

Signs of a strengthening US economy boosted bets for higher inflation and further fueled speculations that the Fed may bring forward the timeline for tapering its bond purchases. This was evident from a fresh leg up in the US Treasury bond yields, which provided an additional boost to the greenback and further drove flows away from the non-yielding yellow metal. Even a softer tone around the equity markets also did little to ease the bearish pressure surrounding the safe-haven XAU/USD or stall the sharp intraday decline on Thursday.

The downward momentum extended through the early part of the Asian trading session on Friday and drags the commodity to the lowest level since May 19, though stalled just ahead of the $1,850 level. Investors now turned cautious and preferred to move on the sidelines as the focus remains on the closely-watched US monthly jobs report – popularly known as NFP. This will be one of the most important pieces of economic data that would set the tone for the upcoming FOMC meeting later this month and provide a fresh directional impetus to the metal.

From a technical perspective, the XAU/USD, for now, seems to have found some support near an ascending trend-line extending from YTD lows. This should now act as a key pivotal point for short-term traders and help determine the near-term trajectory. The mentioned trend-line, around the $1,855 region, is followed by the very important 200-day SMA near the $1,842 area. Sustained weakness below will be seen as a fresh trigger for bearish traders and accelerate the slide further towards the $1,816-15 intermediate support en-route the $1,800 round-figure mark.

On the flip side, immediate resistance is now pegged near the $1,880-82 region ahead of the $1,895-$1,900 zone. Any subsequent move up might continue to confront some supply near the $1,915-16 area, which if cleared would set the stage for additional gains. The precious metal might then aim to surpass an intermediate resistance near the $1,925 level and accelerate the momentum further towards the $1,950 level.

 

2) NZD/USD Clings To Modest Gains Above Mid-0.7100s, Lacks Follow-Through

The NZD/USD pair edged higher during the early European session and refreshed daily tops, around the 0.7160 region in the last hour, albeit lacked follow-through.

Following an early dip to the 0.7130 area, the pair managed to gain some positive traction and recovered a part of the previous day’s slump to one-month lows. The uptick lacked any obvious catalyst and could be solely attributed to some short-covering from extremely oversold conditions on hourly charts. That said, any meaningful recovery seems elusive amid a modest US dollar strength.

The USD remained well supported by Thursday’s upbeat US economic releases – the ADP report, Jobless Claims, and ISM Services PMI. The stronger data indicated that the US recovery is gathering pace and fueled speculations that the Fed may bring forward the timeline for tapering its bond purchases. This was evident from the overnight strong move up in the US Treasury bond yields.

Hence, the market focus will remain glued to Friday’s release of the closely-watched US monthly jobs data. The NFP report will be one of the most important pieces of economic data that would set the tone for the upcoming FOMC meeting later this month. A stronger NFP will further pose risk to the assumption that interest rates will stay low for a long time. This, in turn, should be enough to provide an additional lift to the USD and prompt fresh selling around the NZD/USD pair.

Heading into the key data risk, investors might refrain from placing any aggressive directional bets. This makes it prudent to wait for some strong follow-through buying before confirming that the recent corrective fall has run its course and positioning for any further gains.

 

3) EUR/USD Struggles Around 1.21 As Dollar Holds Gains Ahead Of Nonfarm Payrolls

EUR/USD is trading around 1.21, unable to recover from the blow it received from a trio of strong US figures on Thursday. All eyes are on Nonfarm Payrolls figures for May, which are set to show an increase of 664,000 jobs.

Euro/dollar is suffering from downside momentum on the four-hour chart and has dropped below the 200 Simple Moving Average. However, the Relative Strength Index is nearing the 30 mark, and falling below that level would put the pair in oversold territory.

Some support awaits at the daily low of 1.2105, followed by 1.2055, a cushion from mid-May, and then 1.2015, 1.20, and 1.1945.

Some resistance is at the daily high of 1.2130, followed by 1.2160, 1.2175, and 1.22, which played a role in EUR/USD’s trading in recent weeks.

The story of April’s Nonfarm Payrolls may repeat itself in May, at least for the US dollar. The greenback has been benefiting from robust US data pointing to accelerating job gains and also a pickup in inflation.

ADP reported a leap of 978,000 private-sector jobs. While that is the most direct hint toward the official NFP, the correlation between the payrolls company’s figures and the ones coming out from the government has been mixed since the pandemic broke out.

Another reason to expect a somewhat subdued jobs report comes from the employment component of the ISM Services Purchasing Managers’ Index. Similar to the Manufacturing PMI published earlier in the week, it showed a slowdown in hiring. The third promising piece in the trio, the fall in jobless claims below 400,000, is for the week ending May 28 – after NFP surveys were conducted.

Nonfarm Payrolls are set to show a leap of 664,000 positions in May, far above 266,000 initially reported for April. It is essential to note that the NFP will likely consist of substantial revisions. Even with a robust number for May on top of an improved figure for April, the Fed will still likely assess that at least seven million people have yet to return to their pre-pandemic jobs.

Are the dollar’s gains unjustified? Not at all, as the greenback has rightfully been benefiting from the evidence of inflation in ISM’s surveys and by the Federal Reserve’s baby steps toward tapering down its current pace of buying $120 billion worth of bonds every month. However, the NFP could provide an opportunity to sell the dollar before the next rise.

On the other side of the pond, the euro remains supported by the rapid drop in COVID-19 cases in the old continent, but that is mostly priced into the euro. The EU is preparing to auction its new bonds to fund its special aid package.

European Central Bank President Christine Lagarde is set to speak alongside Fed Chair Jerome Powell ahead of the US jobs report, but their topic of the day is climate change, something the markets ignore.

 

4) GBP/USD Rebounds From Near Three-Week Lows, Steadily Climbs Back To 1.4120 Area

The GBP/USD pair managed to rebound around 35-40 pips from near three-week lows touched earlier this Friday and was last seen trading near the 1.4120 area during the early European session.

The pair once again showed some resilience below the 1.4100 round figure and attracted some dip-buying on the last trading day of the week. The British pound remained well supported by the optimistic outlook for the UK’s economic recovery from the pandemic, bolstered by the gradual easing of lockdown measures. It is worth reporting that the British government is all set to go ahead with its plan to fully end restrictions from June 21.

Apart from this, indications that the Bank of England could raise rates well into next year acted as a tailwind for the sterling. the BoE policymaker Gertjan Vlieghe indicated last week that the central bank was likely to raise rates earlier if the economy rebounds more quickly than expected. That said, a modest US dollar strength might hold bulls from placing aggressive bets and cap gains for the GBP/USD pair.

Thursday’s upbeat US macro releases indicated that the US recovery is gathering pace. The stronger data further fueled speculations that the Fed may bring forward the timeline for tapering its bond purchases. Hence, the market focus will remain glued to the US monthly jobs report (NFP), which will be one of the most important pieces of economic data that would set the tone for the upcoming FOMC meeting later this month.

Heading into the key data risk, investors might be reluctant to place any aggressive bets. This, in turn, might keep a lid on any further gains for the GBP/USD pair, at least for the time being.

 

5) USD/CAD Sits Near One-Week Tops, Around 1.2125 Ahead Of US/Canadian Jobs Report

The USD/CAD pair edged higher through the first half of the European session and was last seen trading near one-week tops, around the 1.2125-30 region.

The pair built on the previous day’s positive move and gained some follow-through traction for the second consecutive session on Friday. The uptick allowed the USD/CAD pair to move further away from multi-year lows, around the key 1.2000 psychological mark touched earlier this week and was sponsored by a modest US dollar strength.

The greenback remained well supported by Thursday’s upbeat US macro releases, which indicated that the US recovery is gathering pace. The stronger data also fueled speculations that the Fed may bring forward the timeline for tapering its bond purchases. This, in turn, pushed the US Treasury bond yields higher across the board.

Meanwhile, the latest developments kept a lid on the recent optimism, which was evident from a softer risk tone. This was seen as another factor that acted as a tailwind for the safe-haven greenback. That said, the recent bullish run in oil prices underpinned the commodity-linked loonie and might cap gains for the USD/CAD pair.

Moreover, investors might also refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of Friday’s release of the closely watched US monthly jobs data. The US NFP report will be one of the most important pieces of economic data that would set the tone for the upcoming FOMC meeting later this month.

Traders will further take cues from the simultaneous release of the Canadian employment details. This, along with oil price dynamics, will influence the Canadian dollar and provide a fresh directional impetus to the USD/CAD pair.