The US markets had a roller-coaster ride yesterday, and after being well offside, all the major indices managed to finish higher on the day.
The Dow Jones was down over 500 points at one stage, but managed to close up over 200 points, which sums up how much of a turnaround the US market underwent yesterday. It was reported that President Trump might be a little flexible on one of the North American Free Trade Agreement points, and that boosted sentiment.
Stocks that were in the firing line for the new round of tariffs from China still finished in the red, but off the lows of the day. Beijing has targeted the aerospace and agricultural sectors, amongst others, and stocks like Boeing and Deere clawed back most of the ground they lost. Now that China have levelled the playing field in terms of tariffs, the markets will be cautious about a potential retaliation from President Trump – he still feels there is a major trading imbalance between the two countries.
The services PMI reports from the eurozone and the UK at 9am and 9.30am (UK time) will be in focus today. Economists are expecting the eurozone services PMI report to remain unchanged at 55, while the UK services report is tipped to slip to 53.9, down from 54.5. Lately the UK has been outstripping the eurozone in terms of economic indicators, but the British construction industry has unexpectedly slipped into contraction territory. There is talk the Bank of England will hike interest rates next month, and the services sector needs to be strong if the hawks want to pull the trigger.
Dealers will also be keeping an eye on the US initial jobless claims report at lunchtime. The consensus is for an increase to 225,000, up from 215,000. The ADP private sector report yesterday came in at 241,000, which was comfortably ahead of the 205,000 consensus. The US non-farm payrolls report on Friday will be the economic highlight of the week, and the jobless claims report will lay the foundations for it. While the various employment reports rarely move perfectly in step with each other, but they broadly move in the same direction.
EUR/USD – has been broadly pushing higher over the past month and resistance may come into play at 1.2476, and a move beyond that might put 1.25000 on the radar. Support might be found at 1.2239 or 1.2154.
GBP/USD – continues to be in the same upward trend that it has been in over the past year, and should the rally continue, it could target 1.4244. While a pullback may find support in the 1.3900 region.
EUR/GBP – has been losing ground for nearly one month, and while it remains below the 0.8800 mark, the bearish move is likely to continue. Support might come into play at 0.8667. A break above 0.8800 might put 0.8891 (the 200-day moving average) on the radar.
USD/JPY – has been in a downward trend since November, and if the bearish moves continue, it could target 104.63. Rallies may encounter resistance at 108.00 or 109.78.
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