If there are no Americans, it blows boredom in the markets

While Americans are celebrating, other markets are getting bored. So it is this time. In Europe, declines dominate in the short term and the DAX has a problem with re-attacking historic highs. The arrangement of candles on the chart shows more and more that we are preparing for a larger correction.

China's economy is weakening

Crude oil is rising after new reports from Saudi Arabia, but we are still "closed" in a narrow consolidation on the chart. The currency market also does not show much volatility. On EURUSD pair it is getting smaller. Today's PMI should not be a breakthrough, because these are final data, which usually do not bring any major surprises. The market is now waiting for tomorrow's ISM for services and Friday's NFP.

During the night hours we learned a bit more about the condition of the Chinese economy. In June, the pace of economic growth in the Middle Kingdom weakened further. Today's S&P Global/Caixin Services PMI fell to 53,9 from 57,1 in June. in May, in line with the downward trend observed in the official PMI for the non-manufacturing sector. This suggests that consumer demand has increased at a more moderate pace as pent-up demand fades as the economy reopens after the lockdown.

Additionally, the Caixin manufacturing PMI earlier this week was 50,5 in June, above the neutral 50 but down from 50,9 in May. This was better than the official manufacturing PMI, which was 49,0 in June and was below the borderline for the third month in a row. Nevertheless, the Caixin PMI suggests that the manufacturing sector is losing momentum.

Awaiting NFP readings

The market is currently waiting for tomorrow's data on the US ISM report. The culmination, however, will be the NFP reading on the first Friday of the month. The main ISM index is expected to increase from 50,3 pts. up to 51 points The market will pay a lot of attention to the sub-index of employment and prices paid. They will show what is happening on the labor market and inflation trends.

After the NFP, a worse result is expected around 225. new jobs. May surprised with a solid result. If the Thursday-Friday data show weakness across the board, it will be another brick to lower market expectations for the continuation of restrictive Fed policy. In such a scenario, the dollar has a chance to weaken, which would result in EURUSD going above 1,09 again and heading towards 1,11, where the horizontal resistance set by the April-May highs falls out.

Source: Łukasz Zembik, OANDA TMS Brokers