Alpesh Patel
InvestingBetter.com
General market theme
So it’s finally Friday and the Non-Farm Payrolls report is upon us as traders are eager to see whether the recent pickup in Dollar’s momentum can be extended on the back of a bullish labor market report. Truth be told the broader bias for the US Dollar was and remains bearish and the pickup in its strength counts only a couple of days of life so for the US currency to extend its current rally against its peers a really exciting NFP reading is required.
If traders see a number around 275k jobs added and higher wage growth then we should see more gains for the Dollar as it might suggest a higher probability for a rate hike before September. In the opposite case that the NFPs print in a normal or even bearish manner the broader negative bias will take its toll on the Dollar.
Price action highlights
The Euro moved lower yesterday in a day of limited price action and no news or reports and reached the 1.1400 level. The Single currency has been correcting to the downside for the past few days and now the correction spans more than 200 pips ahead today’s employment report from the US. A confirmation of Dollar’s momentum via a strong NFP reading should send the Euro even lower and the next area of focus lies around the 1.1320 level while a bearish report will push the Euro higher again with the 1.1500 resistance being the first target to the upside.
The Cable edged lower at the beginning of the day yesterday on the back of another bearish PMI report as the Services sector’s report printed negative like the Construction and Manufacturing component did earlier in the week. However given the recent decline in the Pound and the currency being oversold the UK currency didn’t lose any more ground but instead managed to remain afloat just below the 1.4500 level. Today’s NFP report however has the potential to drive the rate even lower if the Dollar gets a confidence boost with the 1.4400 level coming up as the next area of interest.
Focus of the day
It goes without saying that today investors’ focus will be on the Non-Farm Payrolls reading as it will dictate the price action for days to come. The focus will be both on the number of jobs added where the magic number to boost the Dollar is 275k and on the Average Weekly Earnings component where significant improvement is needed in order to send the US currency to the upside across the board.
Economic Calendar
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