Stocks experienced a significant decline on Thursday as the release of stronger-than-anticipated jobs data heightened investors’ apprehension about the state of the economy and the trajectory of interest rates.

The Dow Jones Industrial Average dropped 1.07%, or 366.38 points, closing at 33,922.26, while the S&P 500 and Nasdaq Composite fell by 0.79% and 0.82% respectively. This marked the worst daily performance for both the Dow and S&P 500 since May.

With just Friday’s session remaining in the holiday-shortened trading week, all three major indexes are on track to end the week in negative territory, with the Dow poised for a 1.4% decline, and the S&P 500 and Nasdaq facing losses of 0.9% and 0.8% respectively.

In June, the private sector witnessed a substantial increase of 497,000 jobs, according to data from payroll processing firm ADP, surpassing the Dow Jones consensus estimate of 220,000. This robust gain, the largest since July 2022, exceeded expectations by a wide margin, especially when compared to the downwardly revised 267,000-job addition in May.

The market’s reaction to this positive news indicates that investors may now anticipate a stronger employment report, potentially prompting the Federal Reserve to resume its interest rate hikes after a pause in June.

Traders are pricing in a 92% chance of a rate hike at the central bank’s upcoming meeting, as suggested by CME Group’s FedWatch tool. Amidst these concerns, the Labor Department’s report showing a larger-than-expected decline in job openings in May provides a glimmer of hope that the tight job market could be showing signs of loosening.

Data by Bloomberg

On Thursday, the stock market experienced a broad decline across all sectors, with the S&P 500 index falling by 0.79%. The Information Technology sector showed the smallest decline at 0.16%, followed by Consumer Staples (-0.34%), Real Estate (-0.60%), and Materials (-0.71%).

Industrials and Health Care both dropped by 0.74% and 0.87% respectively. Financials and Communication Services had larger declines at 0.91% and 1.06% respectively, while Utilities experienced a more significant drop of 1.21%.

The Consumer Discretionary sector saw the largest decline of 1.65%. The Energy sector had the most substantial decrease, falling by 2.45% on Thursday. This widespread decline across sectors reflects the overall negative sentiment in the market on that day.

Major Pair Movement

USD/JPY experienced a 0.3% decline following a brief rally, as a combination of risk-off flows and caution ahead of the Non-Farm Payrolls (NFP) report limited gains. The pair struggled to reach the previous day’s high despite a temporary surge in 2-year Treasury yields, which retreated from the 16-year highs seen on Thursday.

The inability to sustain momentum, coupled with speculation surrounding potential Yield Curve Control (YCC) adjustments by the Bank of Japan’s Deputy Governor Uchida, weighed on USD/JPY. Market participants are now eagerly awaiting the NFP report, given the historically weak correlation between the ADP jobs data and the official payroll figures.

Positive outcomes on Friday could reinforce dip-buying strategies, while disappointing data may shift sentiment.

EUR/USD initially pierced the 10-day moving average and reached 1.0901 on EBS during early New York trading. However, the pair reversed course and turned negative as US yields and the US dollar rallied.

The market received a series of indicators pointing to a robust jobs market and a strong economy, subsequently increasing expectations for future Federal Reserve rate hikes, as implied by rates futures. The risk-off sentiment led to a decline in equities and gold prices, while USD/CNH saw gains.

Nevertheless, USD sellers emerged later, pushing EUR/USD into positive territory, hovering near 1.0880 by the end of the session. The formation of a daily doji candle reflects market indecision, with upcoming key data, particularly the US June jobs report and Average Hourly Earnings (AHE), poised to influence further direction. Should the data provide an optimistic outlook, EUR/USD bears may take control.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Rebounds from Three-Week Lows Amid Positive US Data, Lingering Downside Risks

The EUR/USD currency pair experienced a rebound from three-week lows near 1.0830, surging towards 1.0900 on Thursday. The recovery occurred twice during the European session and following the release of favourable US economic data.

However, despite the notable bounce, various factors such as risk aversion, positive US data, and technical indicators suggest that the downside risks persist for the EUR/USD. Key events in the Eurozone, including flat retail sales and a significant increase in German factory orders, alongside upcoming reports on industrial production and a speech by European Central Bank (ECB) representative De Guindos, could impact the currency pair’s trajectory.

Additionally, the positive surprises in US data, including a robust rise in ADP Private Employment and an increase in the ISM Service PMI, have further strengthened the US Dollar and contributed to the decline in Treasury bonds. The bond market is undergoing a repricing of central bank policies, with both US and European bond yields surging as a result.

Chart EURUSD by TradingView

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According to technical analysis, the EUR/USD pair moved higher on Thursday and reached the middle band of the Bollinger Bands. Currently, the price is moving just above the middle band, indicating a potential for further upside towards the upper band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 51, suggesting a shift from bearish sentiment to a more neutral stance for the EUR/USD.

Resistance: 1.0926, 1.0965

Support: 1.0842, 1.0790

XAU/USD (4 Hours)

Spot Gold (XAU/USD) Prices Plunge as US Dollar Surges on Strong Employment Data and Risk Aversion

Gold prices experienced a significant drop on Thursday, as the XAU/USD pair traded as low as $1,902.62 per troy ounce. The decline was fueled by the US Dollar’s surge, driven by robust American employment-related data that sparked risk aversion and triggered a sell-off in stocks.

The Greenback also benefited from a resurgence in government bond yields, with the 2-year Treasury note reaching 5.12% before settling at 5.04%. The impressive employment figures in the US, including the ADP private jobs creation report surpassing expectations at 497K in June, along with a slight increase in Initial Jobless Claims and a decrease in job openings, indicate a tight labour market that supports the likelihood of further monetary tightening.

Additional positive data, such as an improved ISM Services PMI and upward revisions in S&P Global’s Services and Composite PMIs, underscore the resilience of the US economy and reinforce expectations of continued rate hikes by the Federal Reserve.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is undergoing a downward movement on Thursday, approaching the lower band of the Bollinger Bands. Presently, the price is gradually rising from the lower band, suggesting a potential upward movement towards the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 41, having declined from a higher level, indicating a neutral stance for XAU/USD with a slight bearish inclination.

Resistance: $1,919, $1,925

Support: $1,909, $1,903

Economic Data

On Wednesday, the Dow Jones Industrial Average experienced a decline as Wall Street returned from the Fourth of July holiday break. Investors analyzed the recently released minutes from the Federal Reserve meeting, seeking insights into the current state of monetary policy.

The Dow dropped by 129.83 points or 0.38%, closing at 34,288.64, while the S&P 500 fell 0.2% to 4,446.82, and the Nasdaq Composite slipped 0.18% to end at 13,791.65. This marked the end of three-day winning streaks for both the Dow and S&P 500.

The minutes revealed that most officials indicated the possibility of future interest rate hikes, which made investors more cautious due to concerns about the market and economic trajectory for the second half of the year.

The released data on Wednesday morning showed weaker-than-expected factory orders in May, further contributing to market uncertainties. Investors will be closely monitoring employment and wage data later in the week to gauge the strength of the labour market.

The previous week had been positive for the Nasdaq, which had its best first half of the year since 1983, and the S&P 500, which saw its best first-half advance since 2019. However, the Dow had a more modest gain of only 3.8% during the same period. The holiday-shortened week brought attention to the impact of the Federal Reserve’s rate hike policies on market sentiment and expectations for the rest of the year.

Data by Bloomberg

On Wednesday, the overall performance of the stock market saw a slight decline of 0.20%. However, some sectors managed to buck the trend and achieve positive gains. Communication Services experienced the highest increase of 1.21%, followed closely by Utilities with a rise of 1.10%.

Real Estate also showed a modest growth of 0.47%. On the other hand, certain sectors faced losses, with Materials taking the biggest hit at -2.47%. Energy and Information Technology also saw declines of -0.54% and -0.56% respectively.

The remaining sectors, including Consumer Discretionary, Health Care, Consumer Staples, Financials, Industrials, and Materials, all experienced smaller drops ranging from -0.05% to -0.60%.

Major Pair Movement

In Wednesday’s trading, the dollar index experienced a 0.3% gain, seen as a precursor to important upcoming data releases in the United States on Thursday and Friday. The dollar’s performance was supported by weaker-than-expected data and risk-off sentiment due to concerns in the market.

The Federal Reserve’s minutes from their recent meeting confirmed existing expectations of a hawkish stance. The decision by the Reserve Bank of Australia to keep interest rates unchanged on Tuesday also contributed to the dollar’s strength.

Additionally, with major central banks raising rates to combat inflation and uncertainties surrounding China’s economy, investors turned to the dollar as a safe haven. As a result, the AUD/USD pair fell by 0.54%, while the USD/CNH pair surged by 0.42%.

The focus in the coming days will be on the release of key US reports on Thursday, including data on layoffs, jobless claims, ISM services, and JOLTS. This will be followed by Friday’s highly anticipated payroll report.

These upcoming reports overshadowed the impact of the Federal Reserve’s minutes, particularly after a series of comments made by policymakers indicating the possibility of two more interest rate hikes this year.

While forecasts suggest a slightly less hawkish stance from the Fed compared to previous periods, it is worth noting that non-farm payrolls have consistently exceeded expectations this year. Investors will be closely watching the expected figure of 225,000 jobs added in June, following the substantial increase of 339,000 in May.

If this week’s data continues to present conflicting signals, as some recent releases have, then the significance of Wednesday’s consumer price index (CPI) will grow. Expectations for Fed rate hikes have remained relatively stable, with a skipped hike in June and a projected 25 basis point increase in July or, at the latest, September.

There is only about a 35% probability of a final rate increase beyond that. The euro fell by 0.25%, briefly touching the daily cloud support level that held June’s lows at 1.08355 on EBS. The European Central Bank is expected to raise rates by 25 basis points two more times.

The Japanese yen, on the other hand, rose by 0.14% after a temporary drop towards 144, a level where 2.38 billion of options are set to expire on Thursday. The yen’s upward trend is consolidating within a range of 144-145 as currency traders await key US data releases.

The British pound declined by 0.16% as investors weigh the potential economic consequences against the market’s pricing of 143 basis points of Bank of England rate hikes.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Slips as Dollar Strengthens and Economic Concerns Weigh

The EUR/USD pair experienced a second consecutive day of losses, dropping below the 20-day simple moving average. Factors contributing to the decline included a cautious sentiment in equity markets, higher US yields, and a stronger US dollar following the release of the FOMC minutes.

In Eurozone data, while inflation expectations remained steady, the Producer Price Index showed a negative annual rate, and the final June Services and Composite PMI figures were revised lower, sparking recession fears. The US dollar strengthened across the board, supported by the FOMC minutes and rising US yields.

Attention now shifts to US labour market data, including the ADP private employment report, Jobless Claims, and JOLTS, followed by Nonfarm Payrolls later in the week.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair moved lower on Wednesday and has reached the lower band of the Bollinger Bands. Currently, the price is still hovering around the lower band, indicating a potential for further downward movement. The Relative Strength Index (RSI) is currently at 37, suggesting a bearish sentiment for the EUR/USD.

Resistance: 1.0926, 1.0965

Support: 1.0842, 1.0790

XAU/USD (4 Hours)

Spot Gold (XAU/USD) Prices Decline as Market Sentiment Deteriorates Ahead of FOMC Meeting Minutes

Gold prices faced downward pressure as market sentiment worsened, causing XAU/USD to trade at around $1,924 after reaching a weekly high of $1,934.99. The demand for the US Dollar increased due to a deteriorated market sentiment ahead of the release of the Federal Open Market Committee (FOMC) Meeting Minutes.

Additionally, concerns arose over China’s export restrictions on metals essential for the chip industry and softer-than-expected growth in the services sector. The FOMC’s decision to maintain the Fund Rate at 5.00/25% and the possibility of multiple rate hikes by year-end further influenced market expectations and the potential for US Dollar gains.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is experiencing a downward movement on Wednesday, with the potential to reach the lower band of the Bollinger Bands. Currently, the price is slightly below the middle band and may move further down towards the lower band of the Bollinger Bands. The Relative Strength Index (RSI) currently stands at 48, having fallen from a higher level, indicating a neutral stance for XAU/USD with a slight bearish bias.

Resistance: $1,932, $1,939

Support: $1,911, $1,903

U.S. stock futures showed little change on Tuesday night as Wall Street prepared to resume trading after the Fourth of July holiday. Dow Jones Industrial Average futures declined by 0.1%, while S&P 500 and Nasdaq 100 futures dipped by less than 0.1%.

The market had closed early on Monday, with slight gains in the Dow Jones, S&P 500, and Nasdaq Composite. The positive session followed a strong first half of the year, particularly for the Nasdaq Composite and S&P 500, which experienced their best starts since 1983 and 2019, respectively.

Market participants remain optimistic about a potential rally in the second half of the year, despite the possibility of a pullback later on.

Investors are keeping an eye on upcoming economic indicators, such as May factory orders data, which is expected to show a rise of 0.6% compared to the previous month. Additionally, the release of June’s Federal Reserve meeting minutes at 2 p.m.

ET will provide insight into the future of interest rate hikes. New York Fed President John Williams is scheduled to speak later in the day at the 2023 Annual Meeting of the Central Bank Research Association (CEBRA) in New York City.

Overall, with the holiday period ending, traders are cautiously anticipating the market’s direction, while remaining hopeful for a potential rally in the second half of the year.

Data by Bloomberg

The stock market is closed on Tuesday due to Independence Day in the US.

On Monday, the overall market showed a slight increase of 0.12%. Among the different sectors, Consumer Discretionary experienced the highest growth with a positive change of 1.07%, followed by Real Estate at 0.85% and Consumer Staples at 0.69%.

Utilities and Financials also saw positive gains with increases of 0.67% and 0.54% respectively. Energy and Materials both had modest growth of 0.31%. Communication Services had a minimal increase of 0.13%, while Industrials only saw a slight rise of 0.07%. On the other hand, Information Technology suffered a decline of -0.31%, and Health Care experienced the largest decrease with a negative change of -0.82%.

Major Pair Movement

The GBP/USD pair displayed resilience by closing up 0.2% despite the strengthening of the US dollar, while the EUR/GBP pair experienced a decline of 0.5%. This strength in the British pound can be attributed to varying expectations regarding interest rate hikes, which are providing a solid foundation of support.

Despite the challenges posed by the stronger US dollar, the pound managed to hold its ground and maintain a positive trajectory.

The AUD/USD pair commenced trading with a 0.31% increase, following a relatively calm session influenced by holiday factors. The Australian dollar (AUD) managed to gain against all major currencies except for the New Zealand dollar (NZD).

Market participants brushed off the Reserve Bank of Australia’s decision to pause, as an underlying hawkish bias remained intact. The positive sentiment surrounding the AUD/USD pair reflected the market’s indifference towards the central bank’s cautious approach.

The EUR/USD pair began trading with a decline of 0.35% after a quiet session influenced by holiday-related factors. The selling pressure on the euro (EUR) against the Japanese yen (JPY) contributed to this lower opening.

The EUR/USD pair faced challenges due to the light selling of EUR/JPY, which weighed on its performance. The impact of the holiday season was felt in the market, resulting in subdued trading activity and influencing the euro’s initial weakness against the US dollar (USD).

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Modestly Falls on Quiet Day, Focus Shifts to FOMC Minutes and US Labor Market Data

The EUR/USD experienced a slight decline on a quiet day in the financial markets, with limited price action due to a US holiday. The Euro lagged behind the pound without any significant economic reports. Volatility is expected to increase on Wednesday with the release of Eurozone economic data and the FOMC minutes.

Market participants remained cautious on US Independence Day, but trading activity is expected to return to normal. The focus is now on the FOMC minutes and upcoming US labour market data, which will influence expectations regarding the actions of the Federal Reserve.

In the Eurozone, the May Producer Price Index (PPI) is anticipated to show a decline, providing some positive news for the European Central Bank (ECB).

Additionally, the final reading of the Markit Services PMI is due, with no major revisions expected.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair remained unchanged on Tuesday and reached the middle band of the Bollinger Bands. Currently, the price is slightly below the middle band, indicating a possible downward movement towards the lower band.

The Relative Strength Index (RSI) is currently at 43, suggesting that the EUR/USD is in a neutral position but slightly bearish.

Resistance: 1.0926, 1.0965

Support: 1.0842, 1.0790

XAU/USD (4 Hours)

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Spot Gold (XAU/USD) Holds Near Weekly High as Financial Markets Remain Quiet on Independence Day

Spot Gold maintained its position near the weekly high reached on Monday at $1,930.98, extending its gains for the fourth consecutive day. With the United States observing Independence Day and no significant news developments, financial assets remained stagnant, trading within familiar levels.

The Reserve Bank of Australia (RBA) announced no change to the Official Cash Rate (OCR) at 4.1%, noting that inflation in the economy has peaked. Initially, the decline in the Australian dollar provided support to the US Dollar, but the American currency reversed its course and weakened against most major counterparts, buoyed by stable Asian shares.

However, European markets closed in the negative territory. Market participants eagerly awaited upcoming labour market updates from the United States scheduled for the latter half of the week, as the macroeconomic calendar offered little else of significance.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is experiencing an upward movement on Tuesday, with the potential to reach the upper band of the Bollinger Bands. Currently, the price is slightly below the upper band and may potentially move downward towards the middle band of the Bollinger Bands. The Relative Strength Index (RSI) currently stands at 55, having fallen from a higher level, indicating a neutral stance for XAU/USD.

Resistance: $1,932, $1,939

Support: $1,911, $1,903

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In a shortened session marking the start of a new trading month, quarter, and half, stock markets experienced slight gains on Monday. The Dow Jones Industrial Average rose by 0.03%, adding 10.87 points to close at 34,418.47.

Similarly, the S&P 500 climbed 0.12% to end at 4,455.59, while the Nasdaq Composite advanced 0.21% to 13,816.77. Tesla shares surged by 6.9% after the company exceeded analysts’ expectations with impressive delivery and production numbers, leading to a boost in other electric vehicles stocks like Rivian, Fisker, and Lucid.

The first half of the year proved to be exceptional for Wall Street, with the Nasdaq Composite registering its highest first-half gain since 1983, surging by 31.7%. The S&P 500 also performed well, jumping 15.9%, marking its best first-half performance since 2019.

Meanwhile, the Dow Jones Industrial Average had a more modest gain of 3.8% during the period. Factors such as increasing enthusiasm around artificial intelligence and resilient U.S. economic data, which defied concerns over rising interest rates, contributed to positive investor sentiment.

Investors are now shifting their mindset from fear of missing out (FOMO) to a more positive outlook for the second half of the year. Sam Stovall, chief investment strategist at CFRA Research, suggests that after a strong first half, investors are considering the potential for continued positive momentum.

While the ISM’s manufacturing purchasing managers’ index for June fell slightly below expectations, signalling a decline in economic activity, investors will be closely watching job market data later in the week for further insights.

Data by Bloomberg

On Monday, the overall market showed a slight increase of 0.12%. Among the different sectors, Consumer Discretionary experienced the highest growth with a positive change of 1.07%, followed by Real Estate at 0.85% and Consumer Staples at 0.69%. Utilities and Financials also saw positive gains with increases of 0.67% and 0.54% respectively.

Energy and Materials both had modest growth of 0.31%. Communication Services had a minimal increase of 0.13%, while Industrials only saw a slight rise of 0.07%. On the other hand, Information Technology suffered a decline of -0.31%, and Health Care experienced the largest decrease with a negative change of -0.82%.

Major Pair Movement

The dollar index initially gained in early European trading but later levelled off as Treasury yields decreased and proved to be less inflationary than anticipated. However, with significant data scheduled to be released later in the week and a U.S. holiday on Tuesday, market reactions remained limited.

The EUR/USD currency pair initially rose from 1.0870 to 1.0934 before stabilizing near unchanged levels. The final eurozone PMI manufacturing index, although slightly higher than the flash estimate, indicated caution for investors and suggested waiting for more data, especially the U.S. claims, ISM services, JOLTS, and employment report to be released later in the week.

The minutes from the Federal Reserve meeting are also set to be released on Wednesday.

USD/JPY broke through a support level that had been holding since June 16. However, despite weaker ISM data, buyers emerged around the 144 level, preventing a significant correction.

For a larger correction to occur, there would need to be a retreat in the spread between Treasury and Japanese Government Bond yields. This retreat seems plausible only if U.S. labour data turns out to be weaker than expected, reversing the trend of mostly positive outcomes.

Additionally, the British pound received a boost following the release of the ISM data, after a previous decline. Market expectations for future rate hikes by the Bank of England continue to overshadow those anticipated by the Federal Reserve.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Recovers as Weak US Data and Holidays Keep Market Calm

The EUR/USD rebounded above 1.0900 during the American session as the US dollar lost momentum due to disappointing economic data and the US holidays. The upcoming release of employment data and FOMC minutes will play a crucial role.

Despite negative revisions to the Eurozone Manufacturing PMI, the European Central Bank (ECB) plans to raise interest rates in July and the odds of another hike in September are over 50%. The weaker US dollar pushed the EUR/USD higher, while hawkish Federal Reserve comments provided support.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair remained flat on Monday and reached the middle band of the Bollinger Bands. Currently, the price is slightly above the middle band of the Bollinger Bands, indicating a potential upward movement towards the upper band. The Relative Strength Index (RSI) is currently at 51, suggesting that the EUR/USD is in a neutral position.

Resistance: 1.0926, 1.0965

Support: 1.0883, 1.0842

XAU/USD (4 Hours)

Spot Gold (XAU/USD) Gains as Weak US Data Pushes Dollar Down

Spot Gold (XAU/USD) experienced a recovery on Monday, bouncing back from its lowest level since mid-March at $1,892.95 per troy ounce. The US Dollar initially found some support but eventually turned south against most rivals during the American session.

The advance of XAU/USD intensified following the release of disappointing US data, with the June ISM Manufacturing PMI falling to 46, missing expectations of 47.2. The contraction in manufacturing output for eight consecutive months, along with easing inflation, has kept financial markets positive and diverted attention away from the USD.

Employment-related figures will be closely watched this week, leading up to the release of the June Nonfarm Payrolls report on Friday.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is experiencing an upward movement on Monday, with the ability to reach the upper band of the Bollinger Bands. At present, the price is slightly below the upper band and may potentially move downwards towards the middle band of the Bollinger Bands.

The Relative Strength Index (RSI) currently stands at 56, having risen from a lower level, indicating a neutral stance for XAU/USD.

Resistance: $1,923, $1,932

Support: $1,911, $1,903

Economic Data

As we kick off a new week, market watchers will focus on two key events: the release of the Federal Open Market Committee (FOMC) meeting minutes and the US jobs reports. Both have the potential to influence market trends significantly and offer vital insights into the health of the US economy.

Switzerland’s Consumer Price Index (3 July 2023)

Switzerland’s CPI increased by 0.30% in May 2023 from the previous month. 

For June 2023 data, which is set to be released on 3 July, analysts expect a 0.2% increase.

ISM Manufacturing PMI (3 July 2023)

The US ISM Manufacturing PMI fell to 46.9 in May of 2023 from 47.1 in April. 

Analysts predict that for June 2023 data, scheduled for release on July 3rd, the index will be at 48.

Reserve Bank of Australia Rate Statement (4 July 2023)

The RBA unexpectedly raised its cash rate to 4.1% in June, following a similar hike in May. The door remains open for further increases due to persistently high inflation and rising wage growth. 

The next cash rate will be released on 4 July 2023, with analysts expecting the central bank to hold its interest rate at 4.1%.

FOMC Meeting Minutes (5 July 2023)

Fed Chair Powell stated that multiple rate hikes are anticipated this year to combat inflation. The Fed has already raised the policy rate by 5 points since last year, impacting areas like housing and investment. 

While the funds rate target remained the same in June, there could be a rise to 5.6% by year-end if economic and inflation rates don’t decelerate.

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US ISM Services PMI (6 July 2023)

The US ISM Services PMI fell to 50.3 in May 2023 from 51.9 in April, pointing to the fifth consecutive month of expansion in the services sector, but the slowest in the current sequence. 

Data for June 2023 is scheduled for release on 6 July 2023, with analysts anticipating a higher figure of 50.

Canada Employment Change (7 July 2023)

The Canadian economy shed 17.3K jobs in May 2023, the first decline in nine months.The unemployment rate rose to 5.2% after remaining at 5% for the five previous months, the first monthly increase in the unemployment rate since August 2022. 

Analysts predict the June 2023 data, due on 7 July 2023, will show a further job loss of 10,000 and a rise in the unemployment rate to 5.4%.

US Jobs Report (7 July 2023)

The US economy unexpectedly added 339K jobs in May 2023, the most in four months. Concurrently, the unemployment rate increased to 3.7% in May 2023, the highest since October 2022.

Analysts predict that for June 2023, set to be released on 7 July, the Non-Farm Employment will add approximately 250k jobs, with the unemployment rate remaining steady at 3.7%.

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The Dow Jones Industrial Average experienced gains as major banks passed the Federal Reserve’s stress test, while an upward revision of the GDP provided relief against recession concerns. The 30-stock index surged by 0.8%, gaining 269.76 points to close at 34,122.42. JPMorgan Chase, Goldman Sachs, Wells Fargo, and other financial stocks saw significant increases, with each rising by more than 3% and 4.5% respectively.

Positive economic data, including an upward revision in first-quarter GDP and a drop in weekly jobless claims, contributed to the overall sentiment of economic resilience. Despite the strong first half of the year, some caution is advised as Wall Street prepares for a potentially volatile second half.

The S&P 500, up by 14.5% this year, is on track for its best monthly performance since January. The Nasdaq Composite, driven by optimism surrounding artificial intelligence, has climbed nearly 30% and is poised for its best first half since 1983.

In contrast, the Dow has underperformed, with only a 2.9% increase. While the markets have shown strength, experts anticipate the possibility of consolidation and urge investors to utilize market volatility to position themselves for a broader recovery.

Overall, the passing of the stress test and positive economic indicators have contributed to a positive sentiment in the market, but caution remains as Wall Street prepares for potential market fluctuations in the second half of the year.

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Data by Bloomberg

On Thursday, the stock market showed a generally positive performance across various sectors. The overall market, represented by the All-Sectors index, rose by 0.45%. The Financials sector led the gains with a strong increase of 1.67%, followed by Materials with a rise of 1.27% and Energy with a gain of 1.11%.

Industrials also performed well, showing a growth of 0.94%. Real Estate and Health Care sectors exhibited moderate gains of 0.87% and 0.65% respectively. Information Technology experienced a slight increase of 0.13%, while Consumer Discretionary showed a minimal rise of 0.06%.

However, some sectors faced a decline in value. Utilities experienced a slight decrease of 0.05%, while Consumer Staples saw a more notable decline of 0.15%. The Communication Services sector showed the largest decrease among the sectors, with a decline of 0.63%.

Overall, the stock market on Thursday displayed a positive performance, with notable gains in the Financials, Materials, and Energy sectors. The declines in the Utilities, Consumer Staples, and Communication Services sectors represented a small portion of the overall market movement.

Major Pair Movement

The dollar index experienced a 0.34% increase as a result of the upward revision of Q1 GDP and the anticipation of two more rate hikes, causing 2-year Treasury yields to surge by 15 basis points. This surge brought the yields closer to the peak observed in March before the banking crisis.

Two-year bund yields also rose by 7 basis points and are approaching their March highs at 3.395%, while 2-year Treasury yields reached a peak of 5.084% in March. Eurozone core inflation for June is forecasted to be 6.7% year-on-year, slightly lower than the previous figure of 6.9%, and U.S. May core PCE is expected to remain at 4.7%.

However, the core PCE is currently at its highest level since December, while eurozone core inflation, if it meets the forecast, would be at its lowest since December.

The disparity between the European Central Bank’s rates at 3.5% and the inflation rate remains significant, whereas the Federal Reserve’s target range of 5.0-5.25% is higher than the core PCE.

Considering the overall economic data, the dollar has benefited from the divergent performance of the eurozone and the United States, which may result in less negative bund-Treasury yield spreads and a potentially higher EUR/USD exchange rate.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Slips as Stronger US Dollar Gains Momentum from Robust Economic Data

The EUR/USD experienced a second consecutive day of losses as it fell below 1.0900, primarily due to a strengthening US Dollar driven by encouraging economic data. Inflation figures in the Eurozone displayed a mixed picture, revealing a slowdown in Spain and a rebound in Germany that came as no surprise.

German inflation in June slightly increased by 6.4%, mainly attributed to reductions in energy prices and transportation costs. However, experts noted that if these factors were excluded, the inflation rate would have declined.

The Eurozone Consumer Price Index data is eagerly awaited on Friday, as the European Central Bank has already indicated an upcoming rate hike in July due to persistently high inflation. Meanwhile, Federal Reserve Chair Powell reiterated a hawkish stance, with policymakers expecting further rate hikes this year.

US economic data exceeded expectations, with Initial Jobless Claims dropping to a four-week low of 239K. The Core Personal Consumption Expenditure Index, the Fed’s favoured inflation gauge, will be closely watched on Friday, as positive figures could solidify expectations of a rate hike soon.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair moved lower on Thursday and reached the lower band of the Bollinger Bands. Currently, the price is moving just above the lower band of the Bollinger Bands which shows that there’s a possibility that the price will move slightly higher to the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 36, suggesting that the EUR/USD is slightly bearish.

Resistance: 1.0904, 1.0965

Support: 1.0842, 1.0780

XAU/USD (4 Hours)

XAU/USD Resilience Fades as Strong US Dollar Drives Gold to March Lows

XAU/USD faced vulnerability despite recovering from losses, as a strong US Dollar drove Gold to its lowest level since March at $1,892. However, a subsequent rebound brought it back to the $1,910 range, alleviating bearish pressure.

The overall outlook for bulls remains complicated due to various fundamental factors. US data surpassed expectations, with Initial Jobless Claims hitting a four-week low at 239K, Continuing Claims unexpectedly dropping to 1.742 million, and Q1 GDP growth being revised higher to 2%.

Conversely, Pending Home Sales in May slid 2.7%, defying expectations of a 0.2% increase. The positive labour market and GDP figures indicate a robust US economy, potentially paving the way for further tightening by the Federal Reserve (Fed). US Treasury Yields surged to weekly highs, impacting XAU/USD, with the 10-year yield reaching 3.86%, its highest level since March.

Concurrently, the US Dollar gained momentum, pushing the DXY above 103.30, a two-week high. Although Gold experienced a sharp rebound after dipping below $1,900, it encountered resistance below $1,915 and eventually stabilized around $1,910.

Despite the temporary relief, the bias remains on the downside for Gold, as factors such as Powell’s hints of higher interest rates and robust US data continue to work against the precious metal. The upcoming release of the Core Personal Consumption Expenditure Index on Friday holds significant importance for both the Fed’s decision-making and the future of Gold.

Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving lower to as low as $1,892 before going back higher and is able to reach the lower band of the Bollinger Bands. Currently, the price is moving higher to reach the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 42 from the lower level, indicating that the XAU/USD is trying to move back in a neutral stance.

Resistance: $1,921, $1,932

Support: $1,903, $1,890

Economic Data

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The S&P 500 saw minimal movement on Wednesday as investors closely analyzed Federal Reserve Chair Jerome Powell’s remarks regarding future monetary policy. Powell emphasized the likelihood of more restrictive measures to combat inflation, including potential consecutive interest rate hikes.

His comments, made at the ECB Forum on Central Banking, alongside other global central bankers, had a mixed impact on the markets.

While the Dow Jones Industrial Average declined by 0.22%, and the S&P 500 dipped slightly by 0.04%, the Nasdaq Composite bucked the trend and closed higher for a second consecutive day. This was driven by the positive performance of tech giants such as Alphabet and Tesla, which saw gains of over 1% and 2% respectively, while Netflix shares surged by more than 3%.

These results contributed to the Nasdaq Composite’s impressive year-to-date increase of nearly 30%, leading to its strongest first half in four decades.

The divergent outcomes on Wall Street reflected a tug-of-war between market optimism and concerns over prolonged low-interest rates.

Despite the potential headwinds caused by discussions of future monetary policy, investors remained optimistic, particularly in the tech sector, riding the wave of excitement surrounding artificial intelligence, and propelling the market to significant gains in the first half of the year.

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Data by Bloomberg

On Wednesday, the overall market saw a slight decline of 0.04%. The energy sector performed well, experiencing a gain of 1.02%, followed by communication services with a rise of 0.80%. Consumer discretionary stocks also showed a modest increase of 0.25%, while real estate saw a smaller gain of 0.21%.

However, there were some sectors that experienced declines. The utilities sector had the largest decrease, dropping by 1.48%. Materials and consumer staples also saw significant declines of 0.68% and 0.59% respectively. The healthcare sector experienced a decline of 0.35%, while information technology and industrials both had small decreases of 0.03% and 0.04% respectively. Financials also declined, albeit to a lesser extent, with a decrease of 0.18%.

Major Pair Movement

On Wednesday, the dollar index strengthened by 0.4% as weaker economic indicators in the eurozone and other regions contrasted with generally positive U.S. data. The eurozone displayed signs of economic weakness, and concerns were raised about the effectiveness of government stimulus measures in boosting the economy and commodity currencies.

In contrast, U.S. data released on Tuesday showed positive results. The market briefly responded to hawkish remarks made at the European Central Bank’s conference, but overall, the focus remained on data dependence. The upcoming days will feature inflation data from both the eurozone and the U.S., as well as jobless claims.

Sterling experienced a decline of 0.8% amid the Bank of England’s dilemma in managing inflation. The USD/JPY pair, despite some fluctuations, maintained its rally since the June meetings of the Federal Reserve and the Bank of Japan, with uncertainty injected by the Japanese side.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Rebounds as ECB Reaffirms Rate Hike Expectations, US Dollar Supported by Fed’s Hawkish Stance

The EUR/USD pair experienced a drop below 1.0900 but rebounded during the American session, aided by the European Central Bank’s (ECB) confirmation of upcoming rate hikes. The Euro received support from ECB President Lagarde’s comments, while the US Dollar benefited from rising expectations of a rate hike by the Federal Reserve (Fed) in July.

Inflation data from the Eurozone started to emerge, with Italy’s Harmonised Consumer Price Index slowing to 6.7% in June. Despite declining headline inflation, ECB members remain focused on persistent inflation concerns.

Better-than-expected US economic data further strengthened expectations of a Fed rate hike, boosting the US Dollar. More economic data is expected, including jobless claims, GDP estimates, and the Core Personal Consumption Expenditure report. While the US Dollar gains momentum against certain currencies, the Euro continues to hold its strength in the market.

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Chart EURUSD by TradingView

According to technical analysis, the EUR/USD pair moved lower on Wednesday and reached below the middle band of the Bollinger Bands. Currently, the price is moving just below the middle band of the Bollinger Bands which shows that there’s a possibility that the price will continue to move lower. The Relative Strength Index (RSI) is currently at 44, suggesting that the EUR/USD is still in a neutral position but slightly bearish.

Resistance: 1.0922, 1.0965

Support: 1.0890, 1.0842

XAU/USD (4 Hours)

XAU/USD Under Selling Pressure as US Data and Central Bankers’ Comments Drive Risk-Off Sentiment

XAU/USD faced selling pressure for the third consecutive day, reaching a low of $1,902.80 during the American session. The US Dollar gained strength due to disappointing US data and cautious remarks from central bankers, leading to a risk-off sentiment in financial markets.

The release of the preliminary estimate of the May Goods Trade Balance, showing a deficit of $91.1 billion, and lower-than-expected Wholesale Inventories in May contributed to the shift in sentiment. During the ECB Forum on Central Banking, Federal Reserve Chairman Jerome Powell stated that inflation needs more time to align with the Fed’s target, leaving room for further monetary tightening.

Bank of England’s Andrew Bailey mentioned the UK economy’s resilience despite persistent inflation, while ECB President Christine Lagarde hinted at a potential rate hike in July. These developments triggered selling pressure on Wall Street and initially boosted the US Dollar, although it later retraced some of its gains.

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Chart XAUUSD by TradingView

According to technical analysis, the XAU/USD pair is moving lower to reach below the previous low on June 23rd, 2023, and is able to reach the lower band of the Bollinger Bands. Currently, the price is slightly higher than the lower band, suggesting a potential upward movement towards the middle band of the Bollinger Bands. The Relative Strength Index (RSI) is currently at 40, indicating that the XAU/USD is in a neutral but slightly bearish condition.

Resistance: $1,921, $1,932

Support: $1,903, $1,890

Economic Data