After a soft start in the morning and the decline in Asian markets on fears over the outlook for the recovery, the sentiment rather changed in the market as the yen took the time to relax after the gains while the dollar held its grounds.
Investors feared the Services ISM will report slowing activity in the sector confronting the ongoing fears of slowdown, yet ahead of the awaited release, the ADP reported better than expected jobs numbers which eased fears over the prospects for the jobs jamboree on Friday.
The news helped the yen ease the surge, especially after the rally to the highest in eight months versus the dollar after it also gained against all the 16 active currencies as equities declined and fear dominated the market.
The USDJPY hit the lowest today at 85.30 the highest since November 27; the pair rebounded from those areas, supported by the ADP figures and rise in equities as US futures turned higher and European futures trimmed their losses and moved closer into gains. The pair still is expected to remain bearish as far as its trading below 85.95 were currently it rebounded and trading flat around opening areas at 85.76 though still our targets are at 85.00 at least, though the low hit provided good support for now for the pair to unload the negative momentum.
As for the euro, the single currency traded in a rather tight range though biased to the downside so far. The pair hit the low at 1.3181 especially after the services PMI was unexpectedly revised lower though still remains in expansion, which is why the decline was limited especially with the strength of 1.3185 support which halted the downside move.
The pair trimmed its losses with the eased sentiment trading currently around 1.3212 still though the tendencies will remain bearish unless the pair now manages to stabilize above 1.3250 to head towards 1.33 areas.
Regarding sterling, the case was not different from the euro regarding the services sector, which also slowed the activity during July sending the start of softening signals for the third quarter. The news helped sterling finish a successful retest for lower support areas mainly hitting the low at 1.5890 for the day rebounding then to the upside and aided as well by reported rising house prices and good banking earnings from UK which eased the fears alongside the US ADP figures. We still see that the bullish scenario might be valid targeting 1.6010-1.6070 areas especially as the four-hour closing was above 1.5875.