The dollar tried to extend a rally on Wednesday as chatter about the possibility of higher U.S. interest rates and a sell-off in tech stocks soured risk sentiment to the benefit of the safe-haven currency.
The dollar’s bounce on Tuesday put pressure on the euro, which dropped to $1.2021 and threatened to breach important chart support in the $1.1995/1.2000 area.
“If sustained, this could suggest today’s session may be important for near-term direction, particularly if EURUSD managed to close below the key $1.20 pivot,” said Ned Rumpeltin, European head of FX strategy at TD Securities.
“We think we will need to see a daily close below the $1.20 mark to give more credence to observations that the USD tends to appreciate broadly during the month of May.”
Against a basket of currencies, the dollar was barely changed around 91.21 but away from a recent two-month low of 90.422. It needs to clear resistance at 91.425 to extend the rebound.
Europe’s reopening and pick up in the vaccination pace there could limit the dollar’s gains, they wrote.
The dollar was steady on the yen at 109.31 and again needs to break resistance at 109.61 to encourage more speculative bids.
· US ADP Employment Change: Caution surfaces in manufacturing
- Largest addition to private payrolls since September expected.
- Nonfarm Payrolls forecast to add nearly one million jobs, with upside risk.
- Manufacturing PMIs slip unexpectedly, citing production constraints.
- Dollar falls modestly on weaker manufacturing optimism.
- ADP leads the Friday NFP report but not normally a market mover.
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Hiring in the US labor market is so hot that only a shortage of workers might prevent companies from signing up the most new employees in seven months.
The private payroll company Automatic Data Processing (ADP) is forecast to report that firms using its services filled 800,000 positions in April, more than half again as many as the 517,000 in March. These companies hired 889,000 new employees in the first quarter.
The pandemic may be waning in the US, but the damage to the American and global economies is far from over. The year-long and in many areas still active impact has disrupted supply chains and component manufacturing at all levels of production.
· ISM Purchasing Managers’ Index
Business optimism has been on a tear over the last six month as executives in the manufacturing and service sectors note the general expectation that the US economy will expand more than 6% this year.
The Manufacturing Purchasing Managers’ Index (PMI) from the Institute for Supply Management (ISM) averaged 61.2 for the four months from December through March, which was the highest since March 1984. The New Orders Index average of 64.7 over the nine months to March was the highest three-quarters of a year since August 2004. The March Employment Index rating of 59.6 was the best score since March 2018.
· Services Purchasing Managers' Indexes
The failure of the manufacturing indexes to improve has reduced prospects for the service sector PMIs that will be reported on Wednesday at 10:00 am EDT.
The overall index is expected to rise to 64.3 from 63.7. Employment is forecast to fall to 55 from 57.2 and new orders is projected to plunge from 67.2, its all-time record, to 56.6.
· EUR/USD Daily Forecast – Test Of Support At 1.1990
Today, foreign exchange market traders will have a chance to take a look at the final readings of Services PMI reports from EU and U.S. Euro Area Services PMI is projected to increase from 49.6 in March to 50.3 in April. Numbers above 50 show expansion, so Euro Area services segment is expected to return to growth. In the U.S., Services PMI is projected to grow from 60.4 to 63.1.
U.S. ADP Employment Change report may also have an impact on the dynamics of the U.S. dollar. Analysts expect that the report will indicate that U.S. businesses hired 800,000 workers in April.
If EUR/USD settles below the 50 EMA, it will head towards the next support level which is located at 1.1965. A successful test of the support at 1.1965 will push EUR/USD towards the next support at 1.1925. In case EUR/USD declines below this level, it will move towards the support at 1.1900.
On the upside, the previous support at the 20 EMA at 1.2020 will serve as the first resistance level for EUR/USD. If EUR/USD settles above this level, it will head towards the next resistance at 1.2040. A move above the resistance at 1.2040 will open the way to the test of the next resistance level which is located at 1.2060.
· Euro zone bond yields edge up as equity markets calm
Euro zone bond yields edged up on Wednesday as equity markets recovered from a sudden slump a day earlier that had sent yields on the safe-haven assets falling sharply.
Germany’s 10-year yield, the benchmark for the region, was up 1 basis point to -0.23% at 0711 GMT, below its highest since March 2020 hit at -0.162% on Monday.
· Biden’s new Covid vaccination goal is for 70% of adults to have at least one shot by July 4
· Everyone aged over 50 in Britain will be offered a third COVID-19 vaccination jab in the autumn in an attempt to eradicate the threat from the infection entirely by Christmas, the Times newspaper reported.
· S.Korea says AstraZeneca, Pfizer COVID-19 vaccines 87% effective after first shot
· Japan faces longer state of emergency, casting doubt on Olympics
The Japanese government is considering extending a coronavirus spurred state of emergency in Tokyo and other major urban areas, a move that could cast doubt on the planned Summer Olympics.
· Australia's most populous state reports first COVID-19 case in more than a month
Australia's most populous state reported on Wednesday its first locally acquired conoranvirus infection in more than a month, with health authorities working to track down the source.
The first local infection in southeastern New South Wales since March 31 strengthens the prospect that it will resume social distancing curbs, many of which had been eased as cases dwindled.
· India posts record daily rise in coronavirus deaths
India's coronavirus deaths rose by a record 3,780 during the last 24 hours, a day after the country became the world's second, after the United States, to cross the grim milestone of 20 million infections.
· India cenbank allows fresh moratorium for some small borrowers amid COVID-19 crisis
· New Zealand parliament says Uyghur rights abuses taking place in China
New Zealand's parliament unanimously declared on Wednesday that severe human rights abuses were taking place against Uyghur people in China's Xinjiang region, spurring the Chinese embassy to decry the move as interference in internal affairs.
· Philippines tells fishermen to ignore Beijing's ban on fishing in South China Sea
The Philippines has rejected an annual summer fishing ban imposed by China in the disputed South China Sea and encouraged its boats to keep fishing in the country's territorial waters.
The fishing moratorium imposed by China since 1999 runs from May 1 to Aug. 16 and covers areas of the South China Sea as well as other waters off China.
· Utility Veolia posts higher Q1 profits and keeps 2021 outlook
French utility Veolia (VIE.PA), which last month agreed a 13 billion euros ($15.6 billion) merger deal with rival Suez (SEVI.PA), posted higher first quarter earnings on Wednesday and kept its 2021 financial outlook.
· Indonesia's Q1 GDP shrank 0.74%, in line with expectations
Indonesia’s economy shrank for the fourth straight quarter in January-March but at a much more modest pace, statistics bureau data showed on Wednesday.
Southeast Asia’s largest economy contracted 0.74% in January-March from the same period a year earlier, compared with a 2.19% contraction in October-December.
· Indonesia's recession eases as gov't boosts spending, exports recover
· Iraq's health minister resigned over a fire from an exploding oxygen tank at a Baghdad COVID-19 hospital last month.
· The United Arab Emirates has extended a ban on entry for travellers coming from India, the foreign ministry said.
Reference : CNBC, Reuters, FXstreet , FX Emprie
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