King dollar has taken a back seat to kick off the week with the new cycle high made immediately after the healthy non-farm payrolls report on Friday giving way to profit taking in a US holiday shortened week.

The rally in the greenback ran out of steam ahead of 1.18 in EUR/USD after the US labour market report eased taper and hike worries. But the world’s most popular currency pair needs to get above 1.1950/75 to stop the momentum in the greenback with eyes on the 1.1807 low from Friday ahead of the cycle trough at 1.1704.

The headline NFP number beat forecasts breaking two months of disappointments, but the unemployment rate was higher than expected. These two gauges of the jobs market are key in the Fed’s assessment of their goals, so having them diverge in opposite directions gives the FOMC the perfect opportunity to stand pat and watch the data, rather than feel there is pressure to act swiftly around stimulus measures.

Stocks continue north …

US stocks closed at new all-time highs on Friday with the advance in the S&P 500 marking the seventh straight trading day that the index has closed at a record, the longest streak since 1997. The Nasdaq ended last week up 2% and reflected the continued shift into growth and tech with a preference for large caps, with the small cap Russell 2000 heavily underperforming on Friday.

Today is Independence Day holiday in the US which means liquidity is low and markets quiet. We’ve seen mixed stock markets in Asia earlier today while European bourses are in the green. There certainly seems to be a lack of worry about rising rates and tapering with bond yields moving lower and the surge in the Delta variant generally overlooked.

Oil drifts higher

The OPEC+ meeting is meeting again today having failed to come to an agreement amid rare rising tensions between the UAE and Saudi Arabia. The former has reportedly agreed to join the broader OPEC+ deal that would increase output by 400k barrels per day from August to December, which is incidentally less than the forecast 500k bpd, but on the condition of a higher baseline that allows it to pump out more oil in 2022.

If no deal is reached, output will likely not increase next month and the remainder of the year risking further rises in oil prices.

Looking further out, if there is no OPEC+ deal by April 2022, it risks an “every OPEC+ member for itself” approach to production. This could flood global markets with oil and trigger another price war, which could send Brent capitulating. For the time being, Brent prices are holding steady as markets await a breakthrough in this latest OPEC+ standoff.

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