|

Nonfarm Payroll preview: Get ready for more Dollar weakness

  • Dollar's chances of gaining some ground conditioned to salaries.
  • Solid employment growth through 2017 not enough for the Fed.

The US monthly employment report will be out this Friday, but traders should be wondering whether it will actually matter in the current dollar-bearish environment. The greenback can't find its footing, under selling pressure ever since the December Fed's meeting. The central bank failed to surprise the market by doing what speculative interest priced in a couple of months ahead of the event. The Minutes of the meeting, released this week, showed that policymakers remain divided and more relevant, puzzled about lagging inflation. Inflation, is still the key for the greenback, as rising prices are today, the only chance the greenback has to regain the upside. That's why, this last semester, the NFP report has been more about average hourly earnings than jobs' creation.

The ADP survey showed that the private sector added 250K new jobs in December, largely exceeding market's estimates, indeed suggesting an upcoming strong report. According to market's forecast, the US economy is expected to have added 190K new jobs in December, following a 228K increase in November. The unemployment rate is expected to remain unchanged at 4.1%. Finally, average hourly earnings are seen up 0.1 percentage points, to 0.3% MoM, and unchanged YoY at 2.5%.

If the headline numbers match or surpass expectations, would mean that the world's largest economy added over 2.1 million jobs during 2017, a pretty solid level that anyway matches what speculative interest knew, and priced in all through the year. Having said so, the headline figure has to be really impressive to actually move the greenback higher, but won't be enough by itself: as usual, the key will be salaries, as a pickup there is urgently needed. Higher salaries are a key factor in rising inflationary pressures, the broken leg of Fed's base.

EUR/USD levels to watch

The EUR/USD has a major resistance area just ahead of the current level, as its 2017 high was set at 1.2092, the second best high ever since topping at 1.2101 in January 2015. Technically bullish, the 1.2100 region is critical as it needs to accelerate through it to actually gain further momentum upward, with short term resistances then at 1.2140 and 1.2175, but a final target at 1.2260 a long.-term static resistance area. Short-term buying interest, on the other hand, is aligned around 1.2200, with a break below the level favoring a deeper corrective movement toward 1.1960 and 1.1920, although even with a weekly close around this last, the bullish trend will remain firmly in place. 

Author

Valeria Bednarik

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

More from Valeria Bednarik
Share:

Editor's Picks

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans. 

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.