Dollar Rally Stifle Risk Appetite, As Attention Shifts to Euro Selling

4 July 2021 | Updated: 4 July 2021

Last week, the dollar was the strongest, but Friday’s sharp drop following positive non-farm payroll job figures implies that its rally is already losing momentum. It’s still too early to declare the greenback’s bearish turnaround. Strong risk-on sentiments, on the other hand, might limit the Dollar gain potential and potentially cause a deeper pullback.

In June, the US added 860,000 new jobs, yet the unemployment rate increased to 5.9%, according to the monthly employment data. The dollar rose sharply following the news but fell short of the close as stocks jumped.

Along with stocks, high-yielding currencies returned, but their positive potential is limited. The EUR/USD pair is currently trading at 1.1865, while the GBP/USD pair is hovering at 1.3830. The AUD/USD pair bounced back from a new 2021 low of 0.7444 to close just a few ticks above 0.7500. As crude oil prices surged, the Canadian dollar was among the strongest USD rivals.

The S&P 500 closed at record levels for the seventh day in a row, indicating strong advances on Wall Street. Government bond yields, on the other hand, fell, with the 10-year US Treasury note ending the day at 1.43 percent.

Euro Under Selling Pressure and Could Fall Further

On Friday, the Euro fell for the fifth day in a row, hitting its lowest level in nearly three months. The pair is headed for a new week in red, with a negative signal emerging from the penetration of an ascending thick weekly cloud.

The Euro was unable to maintain its stability above 1.1900 and began a new slide versus the US Dollar. The EUR/USD pair has moved into a negative zone after breaking through the 1.1880 support level. Even the 1.1860 support level and the 50 hourly simple moving average were breached. Near 1.1840, a low has formed, and the pair is now repairing losses. On the upside, the 1.1860 level and the 50 hourly SMA serve as early resistance.

The United States will celebrate Independence Day at the start of the week, with all local markets closed on Monday. Markit will announce the final versions of its Services and Composite PMIs for the EU during the European session, while the EU will report July Sentix Investor Confidence, which is expected to rise to 30 from 28.1 the previous month.

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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.