US Dollar The Main Driver, Mid-Summer Earnings Season is On

The US Dollar ended higher the previous week after the stronger than expected employment report. The Non-Farm Payrolls jumped to 255K for July, while it was expected at 180K and was up from June 292K. The Average Earnings increased by 0.3% up by 0.1% from expected and the unemployment rate remained at 4.9% as participation rate increased. The US Dollar index climbed as high as 96.49 leaving behind the 50 Moving Average at the H4 chart. In the medium term there is a freshly established up trend which provides expectations for further greenback growth. Moreover, the shining employment report increased expectations for a rate hike by end of 2016 and added to the risk appetite. Today, China released its Trade Data with the trade surplus increasing due to imports reducing more than exports.

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The USDJPY recovered to resistance at 102.24 in an environment of broadly less risk. NIKKEI 225 jumped by 2.44% today, following the new record high of the US indices on Friday. The BOJ failed to meet investors’ expectations for stimulus and that holds the Yen value high against its peers. In the H4 timeframe we see an upside reversal attempt and that is likely to continue in the week. This week, there are not many news coming from Japan, thus the USDJPY would most likely be driven by US data releases such as the Jobless Claims and Retail Sales and at the same time risk appetite fluctuations would have their impact as well.

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The GBPUSD is consolidating at the lower end of its trading range at 1.3054, given the lower trading activity due to summer mood and Olympic Games, the currency pair volatility has decreased. We would expect the consolidation to remain until tomorrow announcemen of the Manufacturing Production. Nevertheless, the prices are likely to move lower as the pound is exposed now to selling pressure. The Bank of England have added to asset purchases the previous week and that has surprised many investors, in contrast to expected rate cut move, and the US Dollar gained support from NFP report, thus the support at 1.2799 is a possible scenario.

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Elsewhere, the EURUSD returned to one and a half week low at 1.1046 as the US Dollar was strengthening, the previous week lacked of Eurozone news while this week we expect news on Friday for the EZ flash GDP. The USDCAD jumped sharply on Friday and has reached today as high as 1.3198, approaching its 4-month high at 1.3251. The bottom line, the US dollar is likely to keep its strength and risk appetite to shine this week, and the US earnings releases are likely to have a relatively higher impact on FX markets due to the absence of news.



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