• USDJPY faces minor injuries after higher US jobless rate; Powell's testimony next on the agenda

• GBPUSD surprasses key obstacle as UK gets new government; monthly GDP data on the agenda

• NZDUSD waits for RBNZ rate decision; bullish outlook above 0.6188-0.6200

 

Fed chairman to testify on economy --> USDJPY

US employment increased at a surprisingly solid pace of 206k on Friday, beating analysts’ forecasts of 190k jobs, but a faster-than-expected rise in the unemployment rate made investors more certain that a rate cut could take place as soon as September.

The US dollar weakened against most major currencies in the aftermath, but its decline against the Japanese yen was minimal, as the pair remained resilient above the nearby support level of 160.30. Powell’s testimony before the Congress on Tuesday at 14:00 GMT could provide some clarity about whether the central bank would like to see more progress on the inflation front before slashing interest rates and if there is possibility for a second reduction this year.

Should Powell open the door for a second rate cut, USDJPY could ease below April’s peak and 160.20, and then towards its 20-day simple moving average (SMA) at 159.50. Investors may also look for verification from Wednesday’s 12:30 GMT CPI inflation report for June, which is expected to show a decline to 3.1%. If the data arrives lower than expected, adding more fuel to the sell-off, it would be interesting to see if the pair can slide below the key 158.35 region to test the important trendline within the 156.85-157.50 territory.

UK GDP eyed after new government takes over -->  GBPUSD

The Labor party thrived during last week’s UK general election, taking over the British economy after 14-years of a challenging Conservative leadership. As the new prime minister Keir Starmer embarks on his nationwide tour this week, as well as attend the NATO summit in Washington on 9-11 July, traders will focus on the monthly UK GDP growth figures on the calendar.

Despite the new era in UK politics, the new prime minister will have a difficult time stimulating the economy in a fragile global landscape. UK GDP growth has been sluggish over the past year and investors anticipate another soft monthly expansion of 0.2% in May from zero previously.

Signs of growth are always welcome, though the data could do little to affect the BoE’s strategy. Nevertheless, the decisive close above a long-term resistance trendline could motivate more buying for GBPUSD. Specifically, the pair could run towards the 1.2900 level if the nearby barrier of 1.2825-1.2859 gives way. Additional gains from there could bring the 1.3000 mark next on the radar.

RBNZ decides on interest rates --> NZDUSD

Elsewhere, the Reserve Bank of New Zealand (RBNZ) will gather on Wednesday to review its policy. There are no expectations for the central bank to alter interest rates or provide updated economic forecasts, however, investors will closely scrutinize the policy statement for any indications that the hiking cycle may not be finished.

In May, the board discussed the potential for a rate hike as inflation made slow progress, resulting in a bullish phase for NZDUSD. While the pair has retraced some of its gains, persisting hawkish communication could bring the bulls back into play. Perhaps if the pair manages to close above 0.6188-0.6200, the recovery phase could expand aggressively to 0.6277-0.6300.

Note that investors price in 40bps of rate cuts by the end of the year. Hence, if the RBNZ decides to follow its global peers on policy rate normalization, NZDUSD could flip backwards. In this case, the 20- and 50-day SMAs could come first into view at 0.6118 and 0.6100, respectively. Then, the 200-day SMA at 0.6069 could provide another opportunity for a rebound ahead of the crucial 0.6030-0.600 support zone