US dollar pops after signs of tightening labour market emerge
The US dollar rose sharply during the American session after strong economic numbers from the United States. In a report yesterday, Markit said the country’s services PMI expanded to 70.4 in May, the highest figure recorded on record. Similarly, data by the Institute of Supply Management (ISM) showed that the non-manufacturing PMI rose to 64 from the previous 62.7. These numbers provide further evidence that the American economy is recovering at a faster rate, helped by decisions from the Federal Reserve and the US government.
Meanwhile, the labour market continued to tighten in May as the private sector added almost 1 million jobs, according to ADP. And last week, 385,000 Americans filed for jobless claims, the first time the figure has been below 400k since the pandemic started. The continuing claims rose from 3.73 million to 3.77 million while the non-farm productivity rose by 5.4%. Later today, the dollar will react to the latest non-farm payroll numbers from the US. Analysts expect that the unemployment rate fell below 6% in May while employers added more than 700,000.
The price of crude oil held steady in the American session after the latest inventories numbers. According to the Energy Information Administration (EIA), American inventories declined by more than 5.08 million barrels last week. This was a bigger draw than the expected 2.44 million and the prior week’s 1.662 million. The prices are also reacting to the positive outcome of the OPEC virtual meeting that was held this week. The members agreed to increase production at a slower pace than expected.
The EURUSD pair formed a double-top pattern at 1.2263 recently. In technical analysis, a double top is usually a sign that the price will keep falling. Overnight, the price fell to the lowest level since May 17. On the four-hour chart, it moved below the 25-day and 15-day moving averages and the ascending trendline. The Relative Strength Index (RSI) dropped to the oversold level of 70. Therefore, there is a possibility that the pair will keep falling as bears target the 38.2% retracement level at 1.2050.
The USDJPY pair rose to a high of 110.32, which was the highest level since April 6. On the four-hour chart, the pair has formed a double-top pattern whose neckline is at 109.35. It is also slightly above the 25-day moving average and the 61.8% Fibonacci retracement level. Further, the signal and main lines of the MACD are above the neutral line. Therefore, the pair may have a pullback ahead of the NFP data.
The GBPUSD price declined after the latest positive employment data from the United States. It fell to 1.4085, which was the lowest level since May 14. It was also along the 23.6% Fibonacci retracement level. The pair also moved slightly below the neckline of the double top pattern and the moving averages. It is forming a bearish flag pattern, meaning that it could soon break out lower as sellers target the next key level at1.4017.