{x} | Trading.live

Summary: Following this week's release of important U.S. employment data (ADP), investors are awaiting today's release of the most crucial U.S. non-farm payroll report, which could influence the Fed's decision on whether to raise interest rates again this year.

Fundamentals

The market currently believes that the upcoming non-farm payroll report could pose potential dilemmas for the Fed and investors. On one hand, stable job growth aligns with the Fed's confidence in achieving a soft landing for the U.S. economy. On the other hand, a tight labor market leading to accelerated wage growth might compel the Fed to maintain its tightening policy, potentially complicating the soft landing strategy.

An increase of 200,000 jobs is expected in July, with the unemployment rate predicted to remain steady at 3.6%. Average hourly wages are forecasted to rise by 0.3% on a month-on-month basis.

Based on recent developments, the market is gradually convinced of the possibility of the Fed achieving an economic "soft landing." The sustained monthly increase of around 200,000 jobs further supports this likelihood.

However, wage growth remains uncertain. With an expected month-on-month growth rate of 0.3%, the annual rate could easily stay above 4%, significantly higher than the Fed's target inflation rate of 2%. A robust report is likely to spark market debates on whether the Fed needs to further tighten monetary policy, pushing the current range of 5.25-5.50% to a peak of 6%.

For the market aspect, today's U.S. non-farm payroll data is expected to confirm a strong performance of the U.S. economy and continue supporting the U.S. dollar. As long as the data today is not particularly dismal, the dollar is likely to find continued support amidst a relatively robust economic development and tight labor market backdrop. However, after the release of strong U.S. ADP data on Wednesday, there is a possibility that the market might have overestimated non-farm expectations, leading to a potentially weak start for the dollar.

The EURUSD remained nearly unchanged on Friday, trading in the range of 1.0950. With the release of U.S. non-farm payroll data, we can expect to see more volatility in the New York market.

Technical Analysis

On Friday, the EURUSD continued to consolidate in a sideways pattern, despite breaking out of a bearish channel in the 4-hour chart. However, the asset still maintains a downward trend and hovers dangerously near the 1.0950 level.

Currently, the EURUSD is still supported by the 61.8% Fibonacci retracement of the upward trend from June to mid-July and reinforced by the 89 and 100-day SMAs. Nevertheless, the relative strength index (RSI) remains below 50, indicating a lack of interest from buyers.

However, if the market gains strong momentum above both moving averages, further upside could be in sight, with a potential extension to the 1.0987 level. Conversely, a daily closing price below 1.0900 may open the door for a further decline toward the 1.0830 level. Breaking below this level would signal a bearish outlook for the medium term.

Overall, the EURUSD may maintain positive momentum in the coming trading days, but only a successful break above the 1.1170 resistance level would reverse the previous bearish sentiment that started from 1.1275. In terms of trading strategy, buying the dips is recommended.

Trading Recommendations

Trading Direction: Long

Entry Price: 1.0875

Target Price: 1.1050

Stop Loss: 1.0800

Valid Until: 2023-08-18 23:55:00

Support: 1.0913, 1.0866, 1.0832

Resistance: 1.0962, 1.0986, 1.1028