Most major currencies closed the week with gains against the US dollar. The Australian dollar (+0.25%) showed the strongest performance. A smaller increase was recorded by the Canadian dollar (+0.22%), the Swiss franc (+0.10%) and the euro (+0.07%). On the other side of the spectrum, the Japanese yen (-0.05%), the British pound (-0.22%) and the New Zealand dollar (-0.46%) registered a decline.
The euro traded lower on Friday, August 7. The single currency began to weaken during the Asian session. Pressure spiked in the US session followed the release of the US jobs report.
The number of new jobs in the nonfarm sector in July totaled 1.763 mln against 4.791 mln in the previous month (compared to the median consensus of 1.6 mln). The unemployment rate fell from 11.1% to 10.1% (vs. 10.5% projected). The May and June readings were upwardly revised by a total 17,000. Hourly wages rose 0.2% compared to -1.2% in June and the median forecast of -0.5%.
In addition, the US dollar acted as a defensive asset after the US President signed a set of new executive orders. Investors shunned risky assets after Donald Trump signed an executive order prohibiting the use of two popular Chinese apps WeChat and TikTok, owned by Tencent and ByteDance, respectively. The ban will enter into force next month.
The White House administration intends to impose sanctions against Hong Kong chief executive Carrie Lam and other high-ranking officials. This turn of events also played into the hands of the dollar ahead of the weekend.
The NASDAQ index shed 2% to 11,079. Negativity was offset by positive data on the US labor market in July. The payrolls report pointed to stronger than expected growth in US jobs. Strong labor market data bode well for the stock market, gold and crypto. By the close of the trading session, buyers pared 1% of earlier losses.
Today’s macro agenda (GMT+3)
The FX market saw a relatively muted opening even though President Trump signed four executive orders on Saturday. One of these orders calls for the continued distribution of expanded unemployment benefits for Americans impacted by the Covid-19 pandemic. Bipartisan talks again failed to agree on the terms for a new coronavirus stimulus package.
Given that the euro opened Friday’s Asian trading session to the downside, today we are looking for prices to recover from Friday's pullback. That said, there are some discrepancies in the old timeframes, so we could see a drop to 1.1741 with a subsequent rebound. At the moment, the price action could move down to the range of 1.1710-1.1725. The outlook appears similar to the overall picture seen last Monday.