The Greenback awaits Fed Minutes and Services PMI
The USD traded lower on Friday despite the acceleration of job growth in June. However, the dollar is resilient near its 3-months high as Federal Reserve officials signaled they expect two rate hikes by the end of 2023. The unemployment rate edged up to 5.9% in June, near May’s 14-month low but still well above pre-pandemic levels.
Fed Minutes to be released on Wednesday as market participants will search for more positive clues that support sooner policy tightening. In its June meeting, the Federal Reserve signaled it would hike interest rates sooner than expected and revised up its 2021 GDP forecast as the easing of coronavirus restriction, fast-paced vaccination and government support, continued to boost the economic activity. The meeting also witnessed initial talks about a bond-buying tapering which is expected later this year.
US financial markets will be closed on Monday in observance of Independence Day.
The Services PMI survey is expected to show resilient growth in June. Positive data and hawkish tone from Fed Minutes shall boost the DXY into the next resistance areas at 92.50 followed by 93.00. A positive outlook remains intact for the short term as long as the dollar index remains above 92.00. Breaching this level will pave way for more losses that could extend to 91.50/75 area.
Will the RBA Support the Aussie?
The Reserve Bank of Australia will hold its monetary policy meeting early on Tuesday, with no policy changes expected amid a COVID-19 resurgence. The bank is expected to hold rates at 0.10%. Between speculations of sooner rate hikes and extension of bond purchases, opinions are divided.
The economic activity is strengthening as the unemployment rate fell to 5.1% in May, even after government support programs ended. Business surveys show high levels of optimism, the housing market is booming, and exports prices are high. However, now that vaccinations have been slow and the major cities are now back in lockdown, the bank may be reluctant to take new steps until the situation is clarified.
The AUDUSD is trading higher after hitting its YTD low at 0.7449 on Friday. A hawkish tone from the RBA should help the pair retest the resistance area around 0.7600. above these levels, gains could extend to 0.7650 and 0.7700 seen back in June and May. On the other side, extending bond purchases or repeating that there is no rate hike until 2024 would send the pair back to this year’s lows at 0.7450 with next support at 0.7390 followed by 0.7300.
CAD: Employment Data and Oil Prices eyed
The Canadian dollar will be waiting for employment data for June on Friday. The economy is expected to add 40K jobs after losing jobs for two consecutive months, and the unemployment rate is seen to tick lower from 8.2% to 8.1%. The local shutdowns lately are likely to weigh down the labor market, but high vaccination rates keep the outlook for the economy so good so far. Another key event for the loonie this week will be the OPEC meeting. Reports showed that OPEC+ members, except the UAE, support proposals to add 400,000 barrels monthly between August and December. WTI crude gained 1.8% last week, following a rise exceeding 9% in June supported by stronger fuel demand as countries recover from the pandemic.
Join the forex market and start trading
Whether you are for the first time in forex trading or switching brokers, AximTrade provides the most competitive trading conditions with advanced execution technology. Choose now from various forex account types, based on your trading strategy, experience, and capital designed for investment. Learn how to open forex account with easy few steps and join the financial markets.