At the beginning of the new week, the market situation is quite optimistic. Nevertheless, traders are still choosing safe-haven assets. The US dollar remained afloat despite a weak labor market report. In fact, the situation is not that negative.
Data for the previous month was upwardly revised and the US unemployment rate dropped to 4.8% from 5.2%. Although the number of new jobs is smaller than expected, the unemployment rate continues falling at the fastest pace last seen seven decades ago. What is more, average hourly earnings also advanced by 0.6% on a monthly basis and by 4.6% on a yearly basis.
If the situation was really awful, the US dollar would have shown an immediate reaction. Its stability proves that a slower rise in the jobs number will hardly make the Fed change its mind about the QE tapering from November.
While the US dollar is trading at the same levels, the euro/dollar pair has a chance to recoup some of its losses. Not numerous bulls are severely pushing the pair towards the level of 1.1600. However, there are no facts that may support the euro. It will be hard to attract buyers, until it trades below the key resistance of 1.1620.
Technical correction is quite possible at the beginning of the week since US bond markets were closed on Monday because of the celebration of Columbus Day. On Friday, Christine Lagarde made it clear that the regulator would not strongly react to the current inflation surge. The ECB still believes that the surge is just a short-lived phenomenon. The Fed is likely to tighten its monetary policy earlier than the ECB. The fundamental factors are still supporting the greenback.
If the price breaks the level of 1.1620 and closes above it, bulls may push the price higher to 1.1650 and 1.1680. Experts at Societe Generale suppose that the euro/dollar pair may rebound to 1.1660. If bears break the level of 1.1495, the pair may slide to 1.1450 or even to 1.1380.
Notably, on October 13, the US will disclose its inflation figures.
In August, consumer prices rose by 5.3% year-on-year, as expected, and by 0.3% month-on-month, which is 0.1 percentage points more than the markets had foreseen. There is a feeling that the situation is developing in favor of slow improvement, but so far, everything is very shaky. In September, both indicators should remain at the same levels, i.e. 5.3% and 0.3%.
This week, traders are likely to be focused on the Fed's meeting minutes. However, markets have already priced in the results of the previous meeting. Now, they are waiting for comments about the monetary policy changes.
