And once again, the trading on payrolls day proved to be highly risky as market participants were divided over whether the strong jobs figures are reason enough to expect a U.S. rate hike by year's end. The latest U.S. jobs data showed a growth of 287,000 jobs in June, the most since October. While this figure alone underpins the health of the U.S. economy, reinforcing the positive outlook for Federal Reserve rate increases, other headline figures of the jobs report failed to impress. The jobless rate rose to 4.9 percent from 4.7 percent while average hourly earnings growth slowed. As a result of the mixed data, the U.S. dollar was taken on a roller-coaster ride before it ended the day unchanged against its major peers. For traders it was yet another day without a clear trend and thus without profitable trading opportunities.
As regards the question of whether a Fed 2016 rate hike is still possible, it can be said that Fed officials are likely to keep a door open for a rate increase this year even though they intend to maintain a cautious approach. Policy makers are likely to await more data before they will move. Next FOMC meetings are on July 26-27 and September 20-21 while investors currently see a 25 percent probability of a rate hike by December.
The focus this week will shift to the Bank of England and its rate decision on Thursday. After dovish comments from BoE Governor Mark Carney, chances of a BoE rate cut in July have jumped to 74 percent. Thursday's monetary policy decision will therefore set the direction for the pound.
Prices narrowed, formatting a symmetrical triangle. According to that pattern, price breakouts above 1.2990 or respectively below 1.2930 could invigorate fresh momentum in the cable.
From the U.S., the most important piece of data will be Advance Retail Sales and Consumer Prices scheduled for release on Friday. From the Eurozone we have no major economic reports scheduled for release this week. The only major event will be the Eurogroup meeting in Brussels.
The overall bias remains bearish with the euro trading within a downtrend channel between 1.11 and 1.0970. The symmetrical triangle predicts increasing momentum after price breakouts above 1.1060 or respectively below 1.1035. With no important economic reports due for release today the euro could be oriented towards the current trend channel.
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