Nonfarm Payrolls Preview: expect the unexpected

Once again, is Nonfarm Payrolls' Friday. The US will release its June employment figures, which will follow the worst release in almost six years, as in May the economy added just 38,000 new jobs. In spite the reading was distorted by Verizon's strike, it was still too weak to support FED's idea of steady growth in the sector, making dollar tumble and casting doubts on the possibility of a FED rate hike this summer.

The FED actually remained on hold in June, and then came the Brexit. The decision of the UK to leave the European Union shocked the financial world, sending the dollar skyrocketing against the Pound, and generally up across the board amid risk aversion. But the referendum also fueled concerns over worldwide economic growth that still persist, and diluted completely chances of a rate hike in the US this year.

Just this Wednesday, the FOMC released the Minutes of its latest meeting, confirming that the poor employment report alongside with the uncertainty surrounding the Brexit referendum, were behind FED's decision to remain on hold.

Also in May, the unemployment rate fell to 4.7%, whilst average hourly earnings increased by 5 cents to $25.59, following an increase of 9 cents in April. Over the year, average hourly earnings have risen by 2.5%, a moderate growth that's not enough to boost consumption and affect inflation.

The ADP survey released this Thursday showed that the US private sector added 172K new jobs, slightly better than expected, and above the previous figure, downwardly revised to 168K, lifting hopes that the Friday's reading will be far more encouraging than the previous number.

So, what can make of this upcoming employment report a market mover? Markets are expecting the economy to have added 178K new jobs, wages to remain steady, and the unemployment rate to tick higher up to 4.8%. Overall, a good report, but nothing shocking. If all of this figures are better-than-expected, and previous month numbers suffer upward revisions, the dollar can see a moderate advance, as chances of a FED rate hike will remain limited by the UK's referendum outcome. A shockingly positive figure, above 240K, and doubling wages, is what the market needs to revive hopes of a hike.

Still, a generally negative report, with less than 100K new jobs added, will fuel concerns over the US economy, and delay a rate hike for 2018,  putting the greenback under pressure particularly against its stronger rivals such as the AUD, the JPY and Gold, with the common currency also benefiting, but not as much as the other three.

Nonfarm Payrolls pre and post release: all you need in just one place

EUR/USD levels to watch

The EUR/USD pair has been trading with little directional strength around the 1.1100 level ever since the Brexit result, with the price stalling twice around 1.1185/90 after bottoming around 1.0910 last June 24th. Technical readings in the daily chart maintain the risk towards the downside, with the price now unable to recover above its 200 DMA, and below the shorter ones, and the technical indicators steady below their mid-lines. A strong static support stands at the 1.1010/20 region, from where the pair recovered, also a couple of times during these past two weeks.

A really negative reading can take the pair beyond the 1.1185 region, with scope then to advance up to 1.1270, the 100 DMA, although gains beyond this last seem quite unlikely. Below the mentioned 1.1010 region on the other hand, the downward pressure will likely increase, and send the pair down to the mentioned 1.0910.