The US dollar index keeps rounding above the 103.60 historical support level. The buyers have already defended this level for three weeks, highlighting their interest in the greenback. Thus, buying USD looks less risky right now.
Focus of the week
The current market sentiment is risk-off and it’s unlikely to change these days. The main issue for investors remains, of course, the coronavirus. Virus cases have surpassed 10 million globally this weekend. Texas, Arizona and Florida continue suffering from the fresh outbreak. That overweighed all the positive economic data. Most analysts believe that the recovery is going to be much slower.
Main market events of the week
China’s Manufacturing PMI will be released on June 30 at 4:00 MT time. This data is important for the whole world as China was the first country that entered the crisis and the first one that get out of it. That’s why investors pay a lot of attention to this report to assess how fast other countries will recover. If the PMI is better than expected, the Chinese yuan will gain.
Also, later the same day the Fed’s chairman Jerome Powell will testify at 19:30 MT time. Traders will focus on the economic prospects that he will give. The pessimistic outlook will strengthen the risk-off market sentiment and increase demand for safe-haven assets such as gold, the US dollar and the Japanese yen.
Finally, the US non-farm payrolls will be released on Thursday, July 2, at 15:30 MT time. It will have a huge impact on market volatility. We can’t be absolutely confident how exactly the market will react, but more possibly if NFP is better than expected, USD will gain, otherwise - drop.
Let’s look at the charts. EUR/USD keeps trying to get higher, but there’s a strong resistance above 1.1300 and the risk-off sentiment may push it down this week. If the pair falls below the low of June 19, it may drop even further to the next support at 1.11.
S&P 500 lost all it gains last week and now approached to the key psychological mark at 3,000. If it breaks it, it may jump to the next resistance at the 200-day moving average at 3,020 and then to the high of June 25 at 3,075. However, most analysts have bearish prospects for the S&P 500 amid the current risk-averse on the market. Look for support levels at the 100-day moving average at 2,915 and 2,820.
Let’s move on to gold. It has reached 8-year highs. The gold rally is likely to continue this week amid the current market uncertainty and fears of the second wave. Most analysts believe it will surge to $1,800. Anyway, support levels are at $1,720 and $1,700.
On the H4 timeframe, the US dollar index has formed a bullish falling wedge. At the beginning of the trading session, the price is testing the upper border of this wedge. Thus, in case of a higher-than-expected Core PCE Price Index m/m, the US dollar will skyrocket against other currencies.
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This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.