AETOS Market Commentary
07/06/2019
EURUSD
The euro made gains on Thursday, closing at 1.1276(+48 pips) against the greenback. As per the prediction of the forecasts, the central bank kept rates unchanged and pushed forward guidance into H1 2020, signaling no rate moves until next year. Such dovish tilt was offset by an optimistic outlook of the economic conditions, and details about the new TLTRO, which seem beneficial for local banks and financial institutions.
Mr. Draghi remarked in the press conference that the central bank stands ready to act if conditions deteriorate, a remake of the “whatever it takes,” amid the risk and the uncertainties related to global trade and economic growth. The pair eased from the mentioned high, but met buyers around 1.1240, ending the day with gains around 1.1300, finding additional support on disappointing US data. The country's trade deficit narrowed by less-than-expected, down anyway amid falling imports, hitting $-50.8B in April.
Weekly unemployment claims increased to 218K in the week ended May 31, while the Unit Labor Costs decreased by 1.6% in Q1. In the trade war front, US President Trump said that the Mexican offer was “not enough,” and while some advances are being reported in negotiations, no resolution seems likely ahead of Monday 10, when the US will hit its neighbor with a new round of tariffs. This Friday, Germany will publish April Industrial Production and the Trade Balance, yet the market will focus on the US Nonfarm Payroll report. The country is expected to have added 185K new jobs in May, while the unemployment rate is seen steady at 3.6%, a 49-year low.
Average hourly earnings are forecasted to have risen by .03% MoM and by 3.2% YoY, in line with the yearly average. Speculative interest is already pricing in a soft outcome, given employment data released throughout these last few weeks
EURUSD 4 Hour Chart
The EUR/USD pair finishes the day just below the daily descendant trend line coming from September 2018 high at around 1.1280, providing short-term resistance.
The 4 hours chart shows that the pair bounced from a bullish 20 SMA, which continues advancing above the larger ones, directionless sub-1.1200. Technical indicators in the mentioned chart hold into positive ground, although losing their bullish strength, as the Momentum eases modestly from daily highs, while the RSI retreats from overbought levels.
The bullish potential will likely be confirmed once above 1.1320, the immediate resistance, with scope then to test the 1.1400 figure
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GBPUSD
The cable pair made small gains on Thursday, closing at 1.2695(+8 pips) against the greenback. GBP/USD pair posted a modest daily advance, settling this Thursday at around 1.2690, as the dollar remained under pressure following softer-than-expected figures, while a firmer EUR post-ECB underpinned European currencies.
The absence of political and Brexit-related news also helped the Sterling. There were no relevant macroeconomic releases in the UK, although BOE's Governor Carney presented the central bank's annual report, saying that policymakers may have to raise interest rates if the economy performs as the MPC expects, although clarifying that if that happens, it will be gradual and to a limited extent. Nothing new there that can boost the Pound. Friday's calendar has little to offer, as the central bank will present the Consumer Inflation Expectations report.
GBPUSD 4 Hour Chart
The 4 hours chart shows that the pair was unable to surpass its previous weekly high at 1.2743, neither able to recover above the ascendant trend line broken Wednesday. The pair held above a mild bullish 20 SMA(Red Line), while the 100(Blue Line) SMA heads south, converging with the shorter one in the current price zone, while technical indicators in the mentioned timeframe ease within positive levels, now about to enter negative territory.
The pair would need to surpass the critical 1.2745 price zone to be able to gather additional strength, quite unlikely considering the upcoming political turmoil, as PM May is set to resign to Tories´ leadership this Friday.
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