The US June non-farm payrolls report is due for release today. It is widely expected to show the US economy added 230K jobs in June after 280K job additions seen in May. The unemployment rate is seen falling to 5.4% in June from 5.5% in May. Average hourly earnings are seen rising 0.2% month-on-month in June, after rising 0.3% in May.
Dollar bullish scenario: NRP print above 200K with rise in average hourly earnings
Job gains above 200K accompanied by a rise in the hourly earnings could trigger a fresh bull run in the USD index.
A point worth noting is the sharp uptick in the personal spending (0.9%) last month, which triggered hopes that US consumer is finally returning to markets on the back of sustained job gains and lower borrowing costs.
Consequently, an uptick in the average hourly earnings (leading to increased personal spending) would further cement the expectations of a September rate hike and lead to strength in the USD index. Add to that, the uncertainty surrounding Greek referendum and trading holiday tomorrow and we could have a big up move in the USD.
In such a case, the EUR and the NZD could turn out to be the biggest losers.
EUR/USD: Could drop to 1.0965 (50% Fib R of 1.0462-1.1467)
The shared currency is obviously at risk as the ECB is at odds with the Fed with regards to monetary policy path. The ECB just announced the inclusion of more assets in its monthly QE program, while a strong data would increase the Fed rate hike possibility. Add to that the Greek referendum on sunday
The pair currently trades at 1.1072. The gains are being capped at 1.1087 (5-DMA)
The spot is also trading below the 1.1084 (38.2% Fib R of 1.0462-1.1467)
The daily chart also shows a bearish daily close on Wednesday ( below the rising trend line)
Consequently, the pair could be pushed to 1.10 (100-DMA), a break below the same could open doors for 1.0965 (50% Fib R 1.0462-1.1467).
NZD/USD: Doors open for 0.6560 (May 2010 low)
The GDT price index fell sharply on Wednesday, with mil powder price falling more than 5% at Fonterra’s GDT price auction. The RBNZ cut rates last month and said it could undo the rate hikes witnessed last year.
USD bearish scenario: NFP print weaker-than-expected and a drop in average hourly earnings
The optimism generated by a rise in the personal spending and last month’s NFP report could be erased if the average hourly earnings fall in June. Moreover, even an NFP print below 230K accompanied by a drop in the average hourly earnings could turn out to be a bearish USD scenario. Meanwhile, a positive average hourly earnings may not be able to support the USD in case the NFP print is under 200K.
In such a case, the obvious choice is the British Pound, since the BOE is the only other major central bank, which is widely perceived to be telegraphing a rate hike. The Pound could also find support due to the sell-off in the EUR/GBP pair ahead of Sunday’s Greek referendum.
GBP/USD: Could break above 1.5638 (38.2% Fib R of June rally)
The technical chart is indicating a further bearish move to 1.5550 (50% Fib R), after having failed to sustain above 1.5606 (23.6% Fib R of Apr-June rally)
However, in case of the weak NFP data, the pair could rise above 1.5606 to break above 1.5638. A daily close above the same could lead to re-test of 1.57 on Friday on a possible sell-off in EUR/GBP ahead of Sunday’s referendum.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.