Forex Today: US Dollar shows positive signs, attention turns to US labor market

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Market participants will continue to digest the FOMC minutes and prepare for the upcoming economic reports about the US labor market. During the Asian session, Australia will report trade data, and later in Europe, Eurozone Retail Sales are due.

Here is what you need to know on Thursday, July 6:

US markets dropped moderately on Wednesday on the back of tensions between China and the US, as well as following reports of softer economic activity. The Chinese Caixin Services dropped more than expected, and Japanese, Australian, and Eurozone PMIs were revised lower. Additionally, US Factory Orders rose below expectations.

Data from the US on Wednesday showed an increase in Factory Orders in May of 0.3%, below the market consensus of 0.8%. On Thursday, the focus will turn to labor market data with the ADP private employment report, Jobless Claims, and JOLTS. These numbers will be followed on Friday by the Nonfarm Payrolls report. Also on Thursday, the ISM Services PMI is due.

The FOMC minutes of the June meeting, when the central bank skipped, showed no major surprises. Some members “favored” a 25 basis points rate hike. The message continues to be that members see more rate hikes ahead, and the markets are finally believing the Fed.

US yields rose, supporting the US Dollar. The 10-year yield climbed to 3.95%, the highest level since mid-March. The DXY rose for the third day, rising above 103.30 but remains under the critical level of 103.50. The short-term direction of the US Dollar will likely be US labor data dependent.

The final June Services PMI from the Eurozone was revised modestly lower, and also the Composite PMI, which dropped below 50 for the first time since December. The Eurozone Producer Price Index declined in May by more than expected, with a monthly slide of 1.9% and the annual rate falling from 0.9% to -1.5%. On Thursday, Germany will report Factory Orders, and Eurozone Retail Sales.

EUR/USD failed to retake 1.0900 and dropped toward 1.0850, as the Euro lagged and the Dollar outperformed. EUR/GBP fell to one-week lows under 0.8550. GBP/USD remained sideways around 1.2700, supported by the 20-day Simple Moving Average.

USD/JPY continued to move in the recent range around 144.50, with the focus on the 145.00 potential intervention level. Higher government bond yields and the divergence between the Bank of Japan and other central banks supports the uptrend.

NZD/USD dropped marginally after being unable to hold above 0.6200. The Kiwi outperformed among commodity currencies. AUD/USD ended a four-day positive streak after failing to retake 0.6700. The pair dropped to 0.6650, the day after the Reserve Bank of Australia (RBA) kept rates on hold. AUD/NZD fell for the fourth day in a row, reaching the weakest level since late May at 1.0760. 

USD/CAD rose from 1.3220, approaching 1.3300, hitting the strongest level in two weeks. The Loonie failed to benefit from higher crude oil prices. The WTI barrel rose 1.25%, hitting weekly highs near $72.00.

Gold spiked to $1,935 but later reversed, falling below $1,920 and ending the day looking vulnerable. On the contrary, Silver rose 0.70% and finished above $23.00. Cryptocurrencies declined, with Bitcoin falling 1.05% to $30,465, and Ethereum dropping to $1,910.