The FOMC meeting in June was very hawkish for the US dollar and maybe more of those long positions are being unwound as the Fed has become more obtuse and dovish with their assessment of when they could realistically taper to any degree let alone start a rate hike cycle. With the Fed moving more attention to the jobs data, today’s ADP number hasn’t done anything to get the dollar hawks excited.
The forex heat-map shows that the Aussie has maintained its relative strength through the entire London session following on from the better-than-expected GDP data today and as the US dollar index has dropped -0.24% since the US data was released.
The DXY has traded through but is currently finding support at the daily-50 ema and as short-term momentum is to the downside it is likely that we test the 200 ema ahead or because of the NFP data out on Friday.
Sentiment towards the US dollar as expressed on the ActivTrader platforms sentiment indicator for the AUDUSD and EURUSD has the traders positioned for long the greenback which is probably adding to the move lower in the dollar. The longer retail holds out for a bounce in the US dollar the more of a squeeze there will be.
The weekly chart for the Aussie shows that current price action has undone the last weekly drop and that the area of demand around the 0.7200 level was legit and buyers are really stepping back in now. If the AUDUSD gets above the weekly swing high and 0.7400 there is room to the upside for 200 pips or more.
The EURUSD is also moving higher and is above all 3 moving averages on the H4 time frame, with the 200-period moving average acting as solid support. I am now waiting to see if this falling wedge does play out and we get a move higher back towards the 1.2100 level.
With the strength in the single currency lasting and the Swiss franc mixed today against its peers, the EURCHF has successfully swept the swing highs of the previous market structure. If that was just a stop run the next bullish thing to watch for would be for a higher low to form or a clear break above the daily-200 ema.
US equities are trading at or around their all-time highs with the Nasdaq and S&P500 gaining 0.60% and 0.30% respectively.
On the hourly S&P500 chart, I am seeing that the moving averages continue to offer dynamic support which is great for trend following and adding to positions. The worrying thing is that the momentum indicator is starting to show divergence at this level, and we could build up to a place where a more severe correction occurs. The first signal of this will be the break of the H1 swing low from the August 31st price action.
The Nasdaq intraday chart shows how the ADP number that missed expectations pulled price into a level of support and the US open + the beat in the US ISM Manufacturing data then resulted in an impulsive move. The price action hasn’t quite yet moved out of the initial balance but a symmetrical triangle like the one forming now should in theory break to the upside.
The equities market responded favorably to the ISM Manufacturing PMI data which showed an increase to 59.9 in August of 2021 from 59.5 in July, beating forecasts of 58.6. Above 50 is expansionary and today’s figure indicates expansion in the overall economy for the 15th consecutive month after the contraction in April 2020. There are still reports of businesses struggling to meet demand and that the supply disruptions are still unsolved, but it is great to see an uptick in the data especially after the ADP jobs data missed expectations.
374,000 new jobs are better than none but expectations were for more than 613k with the lowest of the surveyed coming in at 400k. This hasn’t correlated well with the upcoming NFP’s in the past and it is better than the previous reading, so hence why the correction on the data release was short-lived.