February Non-farm payrolls report is due for release tomorrow is expected to show the economy added 205K jobs, compared to the December figure of 242K. The unemployment rate is seen unchanged at 4.9%, while the average hourly earnings are seen rebounding 0.2% from last month’s 0.1% drop.
USD on a backfoot
US dollar is heading on a backfoot as Fed’s “confuse if you cannot convince†stance has killed Fed rate hike bets. The central bank began the year on hawkish tone, given the background of the first rate hike in December. This was followed by a dovish March statement that triggered a sell-off in USD. But, policymakers immediately came out on wires talking rate hike bets, which were killed once again by dovish Yellen this week.
Overall, it appears the policymakers are looking for reasons to delay the rate hike but do not want markets to believe the tightening is over. The confusion has led to a sell-off in the US dollar.
Only strong hourly earnings would support USD
Labor market strength is well known and a better-than-expected headline payrolls figure or a drop in the unemployment rate would do little to support to USD. This is because, NFP number has stayed resilient post December rate hike, stock markets are back to December highs, and unemployment rate is lower compared to what was seen in December. Still, the Fed has titled on the dovish side.
Read: Nonfarm Payrolls: who cares?
Consequently, USD bulls would need a super strong average hourly earnings figure. On the other hand, USD bears would love to see a weak payrolls figure along with not so impressive hourly earnings.
Gold risks falling to $1200 on strong NFP/wage growth data
Action in gold has caught many by surprise. Usually the metal is the best performer whenever there is a sharp fall in Fed rate hike bets (and USD). However, despite dovish FOMC statement released earlier this month, dovish comments from Yellen this week and the resulting sell-off in the USD, the metal remains in a falling channel on the technical charts.
This means the metal may take a dip even if the payrolls figure is strong; given it is heading into the event on a slightly weaker footing.
Gold daily chart
•Falling channel is seen on the daily chart, daily RSI stays in downtrend
Prices could drop to $1200 (falling channel support) and may even break lower if NFP and average hourly earnings print higher than estimates
On the contrary, weaker data could see prices run into resistance at $1270 (rising wedge – extended level).
GBP/USD – weak data could trigger inverse head and shoulder breakout
The recent dollar sell-off has also helped GBP/USD stage a recovery from the multi-year low of 1.3835. From the UK side of the story, Brexit remains a major threat, plus data is not doing so well either. Sure, the Q4 GDP was revised higher today, but it carried an alarming figure – current account deficit hit 7% of GDP.
Nevertheless, weaker US wage growth figures could trigger an inverse head and shoulder breakout in the pair.
GBP/USD daily Chart
Inverse head and shoulder neckline is seen around 1.4475.
A bullish break in case of a weak US data could open doors for a 1.4514-1.4578 -1.46 levels. Daily RSI remains in favor of bulls, hence a re-test of 1.4668 on weak data should not be difficult.
However, bulls should remain cautious about Brexit related news flow.
In case, the data is strong, a fresh sell-off to 1.41 in the next few days cannot be ruled out in
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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.