June 4st, Euro collapses ahead of Payrolls and Lagarde's performance with Powell

On Thursday, June 4, at the end of the day, the euro rate closed down 0.68% to 1.2127. The pair collapsed in the American session after the publication of favorable macroeconomic statistics in the United States. Data on employment and business activity in the US services sector was better than expected. The dollar strengthened throughout the market. The yield on 10-year Treasury bonds increased to 1.632% from 1.591%

The ISM Service PMI rose to 64.0 in May from 62.7 in April (the forecast was 63.0).

According to the ADP report, the number of private sector jobs increased by 978,000 in May, the largest increase since June last year. The data for April was revised to 654 thousand from 742 thousand. (the forecast was 650 thousand).

Initial jobless claims totaled 385,000 seasonally for the week ending May 29, up from 405,000 in the previous week. Lowest since mid-March 2020.

After a series of excellent data, traders began to buy the dollar, as they believed that the NFP indicator today will exceed the predicted value of 650 thousand and will support the dollar.

Scheduled statistics (GMT +3):

• 11:00, in the eurozone, there are data on changes in retail sales for April.
• 11:30, Britain is to publish the PMI for the construction sector for May.
• 14:00, ECB President Lagarde and Fed Chairman Jerome Powell will deliver speeches.
• 15:30, the US will announce a change in the unemployment rate and the number of people employed in the nonfarm sector in May. Canada will announce changes in unemployment and employment for May.
• 17:00, Canada is to release the Ivey PMI for May. The US will announce a change in production orders for April.
• 20:00, Baker Hughes will publish a report on the number of active oil rigs.

Current situation:

In the American session, the euro fell to 1.2118. Asian speculators moved 1.2104 low. At the time of this writing, the euro is worth 1.2113.

After yesterday's rally in the dollar, the focus of market participants is on the report on the US labor market. Private Sector (ADP) and Unemployment Claims reports give hope that the government report will prove to be strong.

If the Non-farm Payrolls indicator exceeds the forecast of 650 thousand jobs and unemployment decreases, the dollar will continue to rise in price against its competitors. At the moment, the euro may sink to 1.2050. Here you need to look at how the US10Y yield will behave. If it does not rise, then an upward correction will begin in the euro. The fall may be limited, as the optimistic data has already been incorporated into the price on Thursday. If the report disappoints the market, then the euro will have the opportunity to return to the level of 1.2180.

At the daily timeframe, after the breakdown of 1.2160, the scales tipped to the sellers' side. With the strengthening of the downward correction, the first support level will be 1.2070, the second - 1.2005.

Uncertainties are added by the speeches of the head of the ECB Lagarde and the chairman of the FRS J. Powell. They will perform at 14:00 (GMT +3) before the payrolls are published. Considering the important events for the foreign exchange market, today it is better to stay out of the market before the weekend.

Summary: on Thursday, the euro collapsed after the release after the publication of favorable macroeconomic statistics in the United States. The yield on the 10-year Treasury bond rose to 1.632% from 1.591%. Traders bought the dollar in expectation that the NFP indicator today will exceed the forecasted value of 650 thousand and will support the dollar. Uncertainties are added by the speeches of the head of the ECB Lagarde and the chairman of the FRS J. Powell. They will perform at 14:00 (GMT +3) before the payrolls are published. The increased volatility in the market is expected after 2 pm and will continue until the close of trading in Europe.

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