EURJPY Potential Reversal Zone – Probable Price Path
Another blockbuster US labour market report with nonfarm payrolls adding 4.8 million jobs in June and the unemployment rate falling by 2.2% points to 11.1%. The June improvement was led by leisure, hospitality and retail, and followed an upwardly revised 2.7 million jobs added in May (+90k for previous two months), which prompted US president Trump to gloat “our economy is roaring back”. Average hourly earnings fell 1.2% mom and the average workweek also slipped from 34.7 to 34.5 hours. The underemployment rate also fell to 18% while the participation rate rose from 60.8% to 61.5% with the addition of 1.7 million into the labour force. The S&P500 pared earlier gains to end 0.45% higher, led by retailers and airlines, with VIX falling to 27.68.
The UST bond market erased post-NFP gains ahead of the long holiday weekend after stocks pared gains with the 10-year bond yield at 0.67%. Meanwhile, Texas mandated face masks in public after virus cases jumped 4.7%, and the US Senate passed the bill to sanction Chinese officials for Hong Kong’s security law and it now heads to US president Trump for signing. Fed’s Bullard also warned of Covid-19 “twists and turns” and “it’s probably prudent to keep our lending facilities in place for now” to “make sure the markets don’t freeze up entirely”
EUR: The German parliament voted to support the ECB’s asset purchase plan and eliminate legal disputes. The German court ruled in May that the ECB’s asset purchase plan may be unconstitutional, and the German parliament’s vote means that the German central bank can continue to participate in the ECB’s asset purchase plan. Bloomberg reports that the European Council President Michelle may announce a compromise plan for the 750 billion euros recovery fund plan next Monday to bridge the differences between member countries
JPY: The Bank of Japan bought 420 billion yen in one- to three-year Treasury bonds in routine operations this morning, an increase of 80 billion yen from last Friday’s amount, and the purchase amount remained at 350 billion in three to five years and ten to twenty-five years respectively And 120 billion yen. Japan’s June service industry purchasing managers index final value revised upwards from 42.3 to 45, the highest in nearly four months
From a technical and trading perspective, the EURJPY is in a corrective phase after the May early June impulse move higher, as 122 continues to contain the advance, there is a downside equality objective sighted at 118. Yesterday’s candle printed a bearish pin bar reversal and flipped the daily chart bearish. Bearish exposure should now be rewarded on a breach of ascending trendline support at 120.60 opening the move to the equality objective sighted at 118. A close back through 121.50 would negate the more complex corrective thesis and suggest the correction actually completed on the 119 test
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