NFP In Focus
The first major data event of September is up today with the August labour reports on deck later this afternoon. After a volatile summer for the US Dollar, with traders reacting to fluctuating messages from the Fed, all the focus is on today jobs number. The market is looking for the headline NFP to print 750k, down from the prior month’s 943k. The unemployment rate is expected to fall back to 5.2% from 5.4% prior, while average hourly earnings are forecast to weaken slightly to 0.3% from 0.4% prior.
Ahead of the data today we have had two very noteworthy sets of data which have muddied the picture somewhat. On the one hand, we had the ADP employment change number midweek coming in wildly below estimates around the 300k mark (more than 600k forecast). Then, on Thursday we saw the weekly jobless claims number falling to a pandemic-era low.
USD Risks
So, the stage is set for today’s release and the data holds the potential to give us our first big directional moves of the month. The US Dollar has been heavily sold ahead of the release on the back of comments made last week by Fed chairman Powell. Powell acknowledged the ongoing improvement in the US economy though cited the remaining uncertainty in the outlook and left bulls disappointed as he refrained from giving a clear tapering signal.
On the back of those comments, and after mixed data this week, the Dollar is on the backfoot heading into today’s data. Essentially, this means that if the data is weak today, we can expect the greenback to continue trading lower in the near term, boosting equities and risk-currencies. On the other hand, if the data beats expectations today, this could put an end to the current sell off and reignite Fed tapering expectations. However, at this stage it would likely take a firm beat on the headline NFP and solid numbers across the other indicators to fuel a sharp reversal in USD.
Technical Views
Dollar Index (DXY)
The sell off from the highs above 93.40s has seen price trading back down to test the 92.51 region support zone, breaking through the bull channel. With indicators both bearish, there is risk of a deeper move lower here, targeting a break of 92.07 initially. If bulls can defend the level, however, a rotation back up towards 93.40 is likely, creating some consolidation in the near term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.