Trading plan for 03/08/2018
The major currencies spent the night in consolidation, which means the EUR/USD stopped at 1.16, and USD/JPY drifted at 111.70. The market has maintained the strength of the dollar from the New York session and now awaits patience with the NFP report. In a wider sense, the sentiment deteriorates, which is reflected in the strengthening of the dollar to emerging markets. Trade wars remain in the foreground; loses Chinese yuan to 6.88 per dollar.
Retail sales in June from Australia increased by 0.4% m/m /, a bit more than expected 0.3%. AUD / USD slightly raised after data to 0.7370, where it stays up to now. But the market sentiment favors USD, so increases may be temporary.
In the stock market, it was red with the pessimism of Wall Street. Japanese Nikkei225 drops by 0.1% and Chinese Shanghai Composite loses 0.4%.
Oil WTI is slightly off the mark after yesterday’s rally triggered by the report suggesting that US crude stocks will soon begin to fall after surprising increases in recent weeks. WTI is now trading around 68.8 USD.
On Friday, the 3rd of August, the main event of the day is the US job market report in form of the NFP-Payrolls and Unemployment Rate figures. Moreover, the global investors should take a look at the CPI data from Switzerland, PMI Services and Composite PMI data from Germany, France, Italy, Spain, UK and the whole Eurozone, Trade Balance and Ivey Purchasing Managers Index data from Canada. No speeches are scheduled for today.
EUR/USD analysis for 03/08/2018:
The market consensus for the July reading of the NFP-Payrolls data is set at the level of 193k jobs, which is a 20k job less than last time. The Unemployment Rate is expected to drop from 4.0% to 3.9% and the Average Hourly Earnings are expected to increase slightly from 0.2% to 0.3% on a monthly basis (the yearly basis should remain unchanged at 2.7%). The Participation Rate (refers to the number of people who are either employed or are actively looking for work) was reported at 62.9% last time, so this will the point of reference for the today’s reading.
Let’s now take a look at the EUR/USD technical picture at the H4 time frame before the NFP-Payrolls data are released. The market remains locked in a horizontal consolidation between the levels of 1.1574-1.1745 in oversold conditions. In a case of a worse than expected NFP data ( ie. below 194k), the price might spike up towards the upper range boundary. In a case of a better than expected NFP data (ie. above 194k and above 213k), the price might fall further and break below the support at the level of 1.1574. The support for the price will then be seen at the level of 1.1540, which is an important technical support level. Please notice, that the recent breakout below the golden trend line clearly favors the downward scenario, which might result in a broader appreciation of the USD across the board.