The US dollar lost all its gains of the previous day after a purely technical dip in the European trading hours. And, during the New York hours, the greenback was weighed down by macroeconomic data.
The ADP employment report was expected to log 205K new jobs in May, which is enough to sustain stable hiring in the private sector. However, the actual employment increase was just 128K jobs which is a precursor to rising unemployment rates.
Indeed, this is a minor employment growth for the US with its enormous population and high birth rates. The ADP employment report prefaces the government nonfarm payrolls. So, the weak employment data was bearish for the US dollar.
Today, the euro will have a chance to assert strength during the European session. Traders are anticipating the EU retail sales to jump to 3.2% in April on year following a 0.8% growth in March. Robust consumer activity is viewed as a crucial indicator because it serves as a catalyst for overall economic growth.
Nevertheless, the US dollar maintains bullish momentum. As analysts have optimistic forecasts of the official nonfarm payrolls, the US currency is set to extend its rally. The fact of a decline in the jobless rate from 3.6% to 3.5% is alone highly beneficial to the US dollar.
Besides, the US economy has created 320K jobs in May, excluding farm employment. Such growth is more than enough to sustain stability in the labor market. For this, the US economy should add a bit more than 200K jobs per month. All in all, market participants have high hopes for the government employment data.
EUR/USD rebounded off resistance at 1.0636. As a result of this move, the euro has managed to recover almost in full from the last decline. Thus, the corrective move that began in mid-May is still going on.
The H4 RSI technical instrument crossed the 50-period moving average upwards, thus indicating speculative interest in long positions. The D1 RSI is moving in the indicator’s upper area of 50/70. It means that the corrective move is still underway.
Moving averages on the H4 Alligator intersect at various points, which is a sign of mixed trading interest. The D1 Alligator signals a correctional move because moving averages are not intersected.
Outlook And Trading Tips
In view of the recent price change, we assume that the euro is overbought on shorter timeframes. This condition could slow down the upward correction with a dip to follow. The buyers are facing resistance in the area of 1.0770/1.0800.
The scenario of an extended correctional move will come into play if the price settles at least above 1.0850 on the 4-hour timeframe.
Complex indicator analysis generates a buy signal to trade intraday and amid the ongoing upward move in the short term. Technical indicators suggest buying in the medium term for the same reason: the protracted upward correction.
