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Dollar on defensive as investors await U.S. jobs data

The dollar was on the defensive against more growth-sensitive currencies on Thursday, following upbeat U.S. and European economic data, though worries about the coronavirus blunted more aggressive risk taking ahead of upcoming U.S. jobs figures.

The New Zealand dollar led modest gains in Asia, edging ahead by 0.2% to a one-week high of $0.6492.

Against a basket of currencies, the greenback slipped marginally and is tracking toward its worst week in a month, with a 0.4% fall — though it could shift significantly in either direction depending on U.S. jobs data due at 1230 GMT.

Non-farm payrolls figures are expected to show an increase of 3 million jobs last month. But estimates vary widely and the data comes as concerns grow about whether the U.S. economy can sustain its recovery as coronavirus infections surge and some states reimpose limits on business and personal activity.

“Any reasonable reaction to this number must also price in the resurgence in cases,” said Vishnu Varathan, head of economics at Mizuho Bank in Singapore, adding that a strong beat is needed to boost sentiment.

“A shortfall, particularly even one that may be mildly negative, would quickly reinforce the shadows of doubt being cast on plans for unfettered re-openings,” he said.

A miss would probably push U.S. Treasury yields lower, Varathan added, but he said the dollar’s response is less predictable and dependent on whether investors regard hiccups in the U.S. recovery as a challenge to the global rebound.

EUR/USD likely to trade between 1.1170 and 1.1380 – UOB

The outlook on EUR/USD has improved somewhat and is now seen trading within the 1.1170/1.1380 range in the next weeks.

Key Quotes

24-hour view: “EUR dipped below the bottom of our expected 1.1200/1.1270 range yesterday (low of 1.1183) before snapping back up to 1.1274. Despite the rapid bounce, upward momentum has hardly improved. However, there is room for EUR to edge nearer to 1.1290. For today, 1.1330 is unlikely to be challenged. Support is at 1.1225 followed by 1.1200.”

Next 1-3 weeks: “Looking back, we called for a short-term top on 12 Jun when EUR was trading at 1.1280 and expected EUR to trade between 1.1170 and 1.1380. When EUR moved towards 1.1170, we highlighted that EUR “has to close below 1.1170 before a more sustained weakness can be expected”. The rapid manner by which EUR rebounded from 1.1183 yesterday (01 Jul) suggests that EUR is not ready to move below 1.1170. To look at it another way, EUR could continue to trade between 1.1170 and 1.1380 for a while more.”

According to Trading Central (3rd party RIA) the EURUSD is long positions above 1.1100 with targets at 1.1375 & 1.1495 in extension.

* Past performance is not a guarantee of future performance

Number of Lots:Required Margin:Risk Management (50%):Potential Profit/Loss 1.1375
1€ 3,333.33€ 1,666.67€ 1,020.74
5€ 16,666.67€ 33,333.33€ 5,103.70
10€ 33,333.33€ 66,666.67€ 10,207.40
25€ 83,333.33€ 166,666.67€ 25,518.50
50€ 166,666.67€ 333,333.33€ 51,037.00

S&P 500 Climbs on Strong ISM PMI

The S&P 500 Index climbed for a third straight day to 3,115, thanks to a much better-than-expected ISM manufacturing data and Covid-19 vaccine hopes. A clinical trial of a coronavirus vaccine candidate showed promise, according to Bloomberg news. The ISM manufacturing PMI jumped to 52.6 in June, smashing the consensus forecast of 49.5 and firmly entering into expansionary territory (chart below). This helped to boost market confidence against the backdrop of mounting virus concerns. It is worth noting that several US states have called to scale back in re-opening plans as virus cases resurged sharply.

Manufacturing sentiment in the US, China and South East Asia released this week has largely beaten market forecasts, which suggests that an initial recovery in output is perhaps stronger than people would have thought. This helped to paint a rosy view of the global recovery. However, the road ahead may remain bumpy with virus uncertainties and a complicated US-China debate over Hong Kong.

The index today may struggle to gain momentum as traders await the non-farm payroll report ahead of a long weekend. US markets are shut on 3rd July for the Independence Day holiday.—China-A50-Soars-after-PboC-Rate-Cuts.html

According to Trading Central (3rd party RIA) the S&P500 is long positions above 3086.00 with targets at 3138.00 & 3156.00 in extension.

* Past performance is not a guarantee of future performance

Number of Lots:Required Margin:Risk Management (50%):Potential Profit/Loss 3156
0.5€ 6,900.00€ 3,450.00€ 2,266.67
1€ 13,800.00€ 6,900.00€ 4,533.33
5€ 69,000.00€ 34,500.00€ 22,666.67
10€ 138,000.00€ 69,000.00€ 45,333.33
20€ 276,000.00€ 138,000.00€ 90,666.67

GBP/USD: Recovery is seen unchanged near-term – UOB

24-hour view: “We expected GBP to ‘edge higher’ yesterday but it lifted off and soared to a high of 1.2490. The sharp and rapid advance is deep in overbought territory. That said, there is room for GBP to continue to strengthen even though a break of 1.2540 would come as a surprise (minor resistance is at 1.2510). Overall, only a break of 1.2405 would indicate that the current upward pressure has eased (minor support is at 1.2440).”

Next 1-3 weeks: “We noted yesterday (01 Jul, spot at 1.2385) that the recent weak phase has ended and expected GBP to ‘trade between 1.2280 and 1.2480’. GBP subsequently rose quickly to a high of 1.2490 before ending the day on a firm note at 1.2476 (+0.60%). While upward momentum has improved, it is unclear for now if GBP can continue to march higher. Overall, GBP is expected to trade with an upside bias but at this stage, the prospect for a sustained advance above 1.2580 is not high. On the downside, a break of 1.2355 would indicate that the current upward pressure has eased.”

According to Trading Central (3rd party RIA) the GBPUSD is short positions below 1.2540 with targets at 1.2245 & 1.2060 in extension.

* Past performance is not a guarantee of future performance

Number of Lots:Required Margin:Risk Management (50%):Potential Profit/Loss 1.2245
1€ 3,694.67€ 1,847.34€ 2,085.86
5€ 18,473.36€ 36,946.72€ 10,429.30
10€ 36,946.72€ 73,893.45€ 20,858.60
25€ 92,366.81€ 184,733.61€ 52,146.50
50€ 184,733.61€ 369,467.23€ 104,293.00