Strong June US NFPs Boost Technical Conditions for US Dollar Rally

Talking Points:

- US NFPs +288K, UR to 6.1% - USDOLLAR breaks June downtrend.

- AUDUSD, EURUSD more vulnerable than GBPUSD, USDJPY.

- July forex seasonals in QE era still working against greenback, however.

Strong US labor data has set the pre-conditions necessary for a US Dollar rally. Now, several technical factors have lined up, opening a window for the greenback over the next few days. The downtrend seen in the USDOLLAR since early-June has broken, and alongside it there have been bullish developments in two closely-watched indicators.

The resolve seen in the broader USDOLLAR Index is reflected in two of its subcomponents in particular, AUDUSD and EURUSD. Where both pairs may have seasonal tailwinds helping support their respective exchange rates, neither are on the firm technical footing that would inspire confidence among buyers at present levels.

Accordingly, alongside some further promising developments in the GBP-crosses, at present time GBPUSD might not be the best way to play US Dollar strength. The same goes for USDJPY, which is trapped in the hideous ¥101.30-102.75 range, still. If US Dollar strength is to emerge in the coming days, a small window of opportunity has been carved out given the strong fundamental data and the favorable trades may come in AUDUSD and EURUSD.

Speaking of the Euro, recent developments suggest that the European Central Bank is no longer the most important factor behind EURGBP and EURUSD - read why the Bank of England and Federal Reserve may be holding more influence now.

Read more: US Dollar Surges Higher after US Economy Added +288K Jobs in June

--- Written by Christopher Vecchio, Currency Analyst

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