Markets turn choppy as NFP puts Dollar direction in focus

Frank Walbaum

Important news this week

Fri, 06th, 14:30 CET CA Unemployment Rate.

Fri, 06th, 14:30 CET US Nonfarm Payrolls Report.

Markets turn choppy as NFP puts Dollar direction in focus

Markets are becoming increasingly choppy as investors reduce exposure ahead of today's US Non-Farm Payrolls report. The US dollar is attempting to build upward momentum, but the broader picture remains uncertain. DXY has so far failed to break above resistance around 102.50, leaving the next move dependent on the labour market data. A weaker-than-expected reading could undermine the dollar again, while a strong surprise may provide the momentum needed for a breakout.

Market talk

Risk sentiment is fading, with equities moving lower and US technology stocks bearing much of the pressure. The weakness in high-valuation growth stocks suggests investors are becoming more cautious and reducing risk exposure ahead of a potentially market-moving data release. Whether defensive sectors begin to outperform cyclicals could offer another indication of the broader shift in sentiment.

The Australian dollar is also moving lower, reinforcing the impression that demand for risk-sensitive currencies is weakening. AUDUSD is therefore worth watching closely: a sustained move below its weekly support area would provide further confirmation of deteriorating risk appetite.
Interestingly, gold and silver are not attracting particularly strong safe-haven demand despite the weakness in equities. Both metals are approaching technical resistance, suggesting that investors are still reluctant to commit to a decisive move before the NFP release.

US Treasury yields are falling again, creating an important contrast with the dollar's attempt to recover. Lower yields generally reduce the dollar's interest-rate advantage, but the greenback may still find support from defensive positioning. If yields continue to decline following a weak employment report, the dollar could struggle to maintain its recent momentum.

Today's NFP release is the main event. Beyond headline job creation, wage growth and the unemployment rate will be important for assessing the Federal Reserve's next steps. A strong report could revive expectations of higher-for-longer interest rates, while weaker figures may increase pressure on the dollar. However, an unexpectedly sharp deterioration in employment could also trigger another wave of risk aversion across equities and other markets.

Tendencies in the markets

Equities weak, USD stronger, crypto negative, oil weak, metals sideways, JPY mixed.

Author

Frank Walbaum

AUD/USD hangs near three-week low, below 0.6950 as traders await US NFP report

AUD/USD hits a three-week low during the Asian session on Friday as the RBA’s dovish shift and a rout in equity markets weigh on the risk-sensitive Aussie. However, the recent slump in US bond yields to a two-month low keeps US Dollar bulls on the back foot and limits losses for the currency pair as traders look to the US NFP report for a fresh impetus.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

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Gold pares intraday losses; down a little below $4,100 as focus remains on US NFP

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Canada Unemployment Rate set to hold at 6.5% as hiring recovers

Statistics Canada will release its October Labour Force Survey on Friday at 13:30 GMT, with markets anticipating a modest recovery in employment following September's sharp decline. The Unemployment Rate will also be closely watched, as the latest figures could influence the Canadian Dollar.

US Nonfarm Payrolls expected to pick up in October

The United States Bureau of Labor Statistics is set to release October Nonfarm Payrolls data on Friday at 13:30 GMT. The report is expected to show an increase of 65K jobs, up from 29K in the previous month.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.