Home > Market Recap: Slow Start to Trading Week As America Celebrates Independence Day

Market Recap: Slow Start to Trading Week As America Celebrates Independence Day

The 4th of July celebrations continue, and the US markets are closed today. The US dollar remains bid despite ongoing strength in the equity markets.

The US markets are closed today, which means that most of the trading activity will take place in the London session. The NFP report released last Friday showed further improvements in the US labour market, suggesting increasing pressure on the Federal Reserve to act on its tapering decision.

Despite the unemployment rate rising, the labour market is heading in the right direction. Moreover, upward pressures on wages, as suggested by a rise in the average hourly earnings, will likely translate into even higher inflation in the period ahead.

European indices closed the previous week close to their highs. The FTSE 100 index in the United Kingdom closed the week above 7,100 points, the German DAX index above 15,600, and the CAC40 index in France ended the week above 6,550 points. The wind behind European stocks keeps blowing as long as the US markets remain close to their all-time highs. Last week, the S&P500 index made seven daily consecutive all-time highs, a winning streak not seen since 1997.

The currency market is an interesting one to watch this week. The last leg up in the US stock market indices happened with a stronger US dollar, an unusual divergence. After the NFP report, the dollar lost some ground, but it remains strong against its peers since the FOMC June meeting.

Gold recovered some of its losses last Friday, but not enough to call for a reversal of a recent trend. Oil closed the week above $75, as last week’s OPEC-JMMC meeting did not bring anything new to the supply/demand balance.

Daily Analysis

European PMIs may bring some volatility on the euro pairs today, but traders should keep in mind the most important thing – the US markets are closed, and any market reaction should be taken with a grain of salt.

Markets to Watch

EUR/USD, USD/JPY, EUR/AUD– markets in focus today.


The EUR/USD pair is in an interesting place. The market reacted at dynamic support after last Friday’s NFP report, but the bigger picture reflects ongoing weakness.

A head and shoulders pattern suggests a move below 1.15, although the level will likely act as strong support, given it offered important resistance at the start of the pandemic.


The USD/JPY has rallied all year so far. It climbed from 103 to above 111, and one cannot escape the feeling that it will test the pandemic highs above 112. At that point, bulls should be cautious as the level acted as strong resistance and another rejection cannot be ruled out.


The EUR/AUD cross is typically inversely correlated to the US stock market. However, the correlation broke recently, as the pair climbed from 1.52, threatening to break 1.60. An inverse head and shoulders pattern suggests an attempt to move above 1.60 is in the cards. Will the move higher come with a stock market correction?

Winners and Losers

US equities and oil closed last week at their highs. The Japanese yen remains weak.

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