Upbeat US Data Warns about Premature Dollar Shorts

European currencies and gold embarked on a modest upside technical pullback as discussed yesterday:

In the EURUSD pair, there was a false breakdown of the horizontal support at 1.07 during the last hours of the Asian session. However, cautious buying interest emerged at the beginning of the European session, although it faded near 1.0750.
A similar technical picture can be observed for gold, with a false breakdown of the lower bound of the trend channel followed by a rapid rise to $1960. However, the temptation to take profits started to wane as market participants anticipate the US unemployment report on Friday.
There is currently a catastrophic lack of upside catalysts for dollar peers. The focus remains on America, as the futures market indicates that the June interest rate hike by the Federal Reserve is not fully priced in yet (estimated probability: 63-66%). The reassessment of expectations regarding Fed policy remains a powerful potential driver of market changes, which could easily trigger margin calls on USD short positions or longs on dollar peers due to the potential upside sweeping move in USD after NFP. Today's dynamics suggest that it is not more than just a technical rebound.
Sentiment indexes in the Eurozone are weak, while the US received another surprise from the Conference Board regarding consumer data. The confidence index exceeded 102 points (forecast: 99), and the previous reading was revised upward. One-year inflation expectations rose to 6.1%. In short, US data keeps investors on their toes, and playing against the dollar at the moment is like playing with fire, at least until the Non-Farm Payrolls report.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.