Global macro overview for 10/07/2017

Global macro overview for 10/07/2017:

The US nonfarm payroll data were mixed. They showed the US economy added 222k jobs in June, which was more than both May's figure and the consensus. The unemployment rate jumped from 4.3% to 4.4% as labour force growth exceeded employment growth. Furthermore, the underemployment (U6) number at 8.6% versus 9.4% in January underlines the improvements in the health of the labour market seen in the first six months of 2017. The most anticipated data of average hourly earnings remained unchanged from May's reading. This is why the US Dollar traded in a volatile market, indicating the bears and bulls were not on the same page as the market traded in a tight range late session.

The current FED's point of view is a strong belief in the Phillips Curve: the tight labour market should be sufficient to push wage growth and inflation higher eventually. This is why the FED keeps hiking the interest rates despite the fact that unemployment and wage growth are low in parallel. Moreover, the FED policymakers will not back off from their earlier hints and announcements, so global investors might expect a balance sheet reduction in September ('quantitative tightening') and one more interest rate hike in December. From that point of view, the US Dollar is set to appreciate across the board soon.

Let's now take a look at the US Dollar Index technical picture on the H4 time frame. So far the bull camp has failed to break out above the technical resistance at the level of 96.51 and it is currently trading around the important support at the level of 95.91. In a case of a breakout lower, the next technical support is seen at the level of 95.47.


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