Intraday Market Thoughts

EUR/USD Death Cross Looms, AUD Jobs Next

by Adam Button
Jul 9, 2014 22:47

The ECB is the world's most dovish central bank while the US dollar proved it couldn't rally once again Wednesday but EUR/USD might finally break with a death cross appearing on the chart. On the day NZD was the best performer as it hit a high since 2011 while JPY lagged. The Australian jobs report is due later.  Ahead of tonight's Aussie jobs report, we have 1 out of 2 AUDUSD trades in progress. Today we issued a new Premium note with 3 charts on EURUSD  to reiterate our 2 existing trades.

The FOMC minutes were the main event in US trading and dollar bulls were looking for any hint that the Fed could be thinking about hiking rates. In the run-up to the release the dollar grinded higher and traders sent the US dollar a dozen pips higher as the headlines hit.

But looking through the headlines there was little the market didn't already know. The Fed will wrap up the taper in October and is mildly upbeat on a pickup in growth. The initial move faded quickly and the US dollar sank to session lows shortly afterwards.

EUR/USD was one of the pairs to take advantage is it climbed to 1.3648 from 1.3612. It's the highest in a week but understates some of the risks. Technicians will be eyeing a death cross with the 55-dma set to fall below the 200-dma in the next day or two.

It's the first such cross in a year. The previous instance lasted only a few days but a death cross in 2011 eventually led to a 1500 pip decline. There's usually no rush to enter on a long-term bearish cross but if the Fed finally signals a hawkish stance that might be the signal.

In the near term, the Australian jobs report is down at 0130 GMT. The consensus is for a 12K rise in jobs but the key is always the breakdown of part-time/full-time work along with the unemployment and participation rates.

AUD/USD reversed after breaking to an 8 month high last week on the comments from Stevens and non-farm payrolls but it has recouped about half of the losses and the inability of the US dollar to rally could give the pair new life if the jobs report is strong. A poor report would likely complete the reversal.

Act Exp Prev GMT
Employment Change s.a. (JUN)
12,300 -4,800 Jul 10 1:30
Fulltime employment (JUN)
22,200 Jul 10 1:30
Part-time employment (JUN)
-27,000 Jul 10 1:30
Unemployment Rate s.a. (JUN)
5.9% 5.8% Jul 10 1:30

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