• US dollar bounces back after last week’s sell-off on NFP miss
  • EURUSD rally stalls on renewed dollar strength
  • EURJPY bounces back as yen struggles continue
  • Gold on the defensive amid renewed dollar strength
  • US equities under pressure at record highs

The US dollar was slightly up at the start of the week but remained pressured near one-month lows. The dollar index, which tracks the greenback strength against the majors, was up 0.14% Monday morning to 92.16, recouping some of the losses accrued last week.

The dollar remains under pressure following disappointing jobs data that showed the US economy added 235,000 jobs in August against an expected 725,000, the smallest gain in seven months. The big miss has lowered expectations of the Federal Reserve commencing the much-awaited asset tapering at its next meeting.

EURUSD rally stalls

Waning tapering expectations is the catalyst fuelling weakness in the dollar against the majors. While the EURUSD has pulled lower after powering through the 1.1908 level last week, it continues to flirt with one-month highs amid renewed bidding on the euro against the dollar.

After a pullback from the 1.1900 level, EURUSD remains well supported above the 1.1860 level for a potential bounce-back, back to four-month highs. A rally followed by a close above the 1.1910 should affirm the uptrend setting the stage for bulls to make a run for the 1.2000 level.

On the flip side, a sell-off followed by a close below the 1.1860 level could accelerate the pullback to the 1.1830 level.

Chart showing EURUSD price rejection

The dollar weakness has given the euro some boost as expectations that the European Central Bank will begin asset tapering continue to fuel the buying spree. Markets have already started to price in a more hawkish narrative from the ECB, affirming the bullish tone on the common currency.

EURJPY pullback hits support

With the euro remaining resilient across the board, a pullback on the EURJPY is experiencing some resistance. The pair has found strong support at the 130.20 level, from where bulls look likely to fuel another leg back to two-month highs of 130.72.

Chart showing EURJPY consolidation

A sell-off followed by a close below the 130.00 level could affirm the sell-off from two-month highs.

However, as it stands, the euro remains resilient against the Japanese yen, registering some gains at the start of the week. EURJPY looks set to edge higher, going by the positive chatter about the ECB moving to taper ahead of the US Federal Reserve at its next policy meeting.

Fundamentals out of the Eurozone have been positive, fueling tapering talks from a good number of monetary policy officials.

Japanese yen sentiments, on the other hand, have been weighed heavily by a move of the Prime Minister Yoshihide Suga to step down. Covid-19 concerns have also continued to weigh heavily on the currency.

Gold on the defensive

Gold was down early Monday morning after a spike to one-month highs on Friday in the commodity markets. Gold futures were down 0.30% to about $1828 in response to the US dollar bottoming out of one-month lows.

Amid the pullback, XAUUSD remains bullish, well supported for further price gains above the $1825 level.

Chart showing XAUUSD pullback

XAUUSD remains well supported for further price gains on the dollar, remaining on the defensive following a disappointing jobs report that showed the smallest gains in seven months. The FED pushing back on tapering will only pump more dollars into the economy through asset purchases, which should continue to pile pressure on the dollar against the precious metal.

While demand for physical gold in Asia has been muted the past few weeks, there are hopes of it ticking higher given the upcoming festival season in India.

US equities under pressure

US equity benchmark indices are struggling for direction, going by the recent rallies to record highs. The Dow Jones industrial average fell 0.21% on Friday as the S&P 500 slipped 0.03%. The Nasdaq Composite was the only to finish on the green, rising 0.21%.

Chart showing NASDAQ uptrend

The mixed tone in the equity markets came as investors reacted to the big miss by the NFP report. The job report is already fuelling concern about the job market recovery amid the spread of the Delta variant.