Market Update – July 4th, 2017

Market Update – July 4th, 2017

Independence Day in the United States as the US traders are in holiday. As such, expect the Forex markets to be quite in the North American session.

 

The previous day the US equity markets managed to push into record territory yet again, with the DJIA leading the pack. Despite the holiday mood, this week has the potential to bring more volatility.

 

As a matter of fact, the week is packed with important economic data. Yesterday, we saw the ISM Manufacturing moving above 57, showing a strong manufacturing sector. However, if the employment component on Friday with the NFP will not confirm this number, the dollar bulls will be disappointed.

 

FOMC Minutes Tomorrow

 

The FOMC Minutes tomorrow deserve a special attention. They refer to the last meeting when the Fed hiked the rates. What matters this time is to see if the Fed sees the case for further rate hikes or not.

 

Judging by the US data lately, they’ll probably delay the hikes until the end of the year. However, it all depends on the NFP number this Friday.

 

One more thing: the favorite way for measuring inflation, the PCE (Personal Consumption Expenditure) is on a downtrend. While the Fed likes it at 2%, it is currently showing 1.4% and falling. As such, if the trend continues, Fed will have a problem meeting its second mandate: to keep inflation below or close to two percent.

 

ADP and ISM Non-Manufacturing

 

The highlight of the week will come Friday with the NFP report. Every first Friday in the month, the NFP number shows the state of the US economy. Until then, traders will look for clues regarding the jobs market. They’ll try to form an educated guess from the ADP and ISM Non-Manufacturing releases.

 

The ADP or the private payrolls number shows the jobs created in the private sector. While not being directly correlated with the NFP, most of the times it points to the same direction.

 

As for the ISM Non-Manufacturing, traders look at the employment component. Because the US economy is a service based one, the employment component matters the most for the NFP number.

 

Conclusion

 

My take is that the US dollar is still on a falling trend, despite the recent strength. This should be mostly seen against the Euro, with the EURUSD pair consolidating in what seems to be a simple correction in an impulsive wave.

 

Because of that, expect the USDJPY to have a tough time moving forward. Perhaps, the wisest move would be to trade this week crosses, and not US dollar pairs.

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