US NFP & The Dollar Index , Soft Brexit Or No Brexit, OPEC The Critical Number

The US NFP is the most important economic number for traders and they like to dissect this number into smaller pieces in order to have a better understanding of the health of the labour market. 

The dollar index is set for a weekly drop ahead of this critical report. The weekly drop in the dollar price is mainly due to some qualms that hiring may have eased off over in the U.S. But, we do think that the downside may be limited for the dollar index from here and the greenback may start to consolidate around its current level (trading range between 95-97). Year-to-date; the dollar index is still up nearly 5.19% which is far stronger performance than any equity market in the developed countries.

The ADP data usually sets the tone for the US NFP number and it confirmed that the private payrolls number jumpted to 179K last month missing the forecast of 195K. The ISM manufacturing PMI released earlier this month painted a more optimistic picture as it came ahead of the forecast (actual 59.3 vs forecast 57.5) and this is despite the fact that trade war has dampened the outlook. 

As for Brexit, softer Brexit is still a likely scenario because it is widely expected that Theresa May’s deal will fail in the UK parliament vote on Monday. However, she has another plan; buy more time to avoid the humiliation in the parliament. The Brexit vote may not take place in parliament on Monday as her Tory allies have advised her to postpone the crunch vote. A defeat in the parliament would trigger fresh attempts to topple her government. So, the likely scenario for her is to re-open the negotiations with Brussels and start a conversation around a better deal which may be backed by the parliament.

So far she has denied the possibility of delaying the vote and this has kept the sterling traders on the edge. We are still holding the critical support level of 1.27 against the dollar, however, this support is under threat. 

Back in the commodity market, OPEC will pick up things where they left off yesterday. No decision was made yesterday in relation to the production cut as the cartel was still discussing the outcome. For the first time in five years, the cartel has been unable to decide on the oil production cut because Russia has decided to flex it’s muscles. The problem is that not everyone is on board in relation to the production cut and most importantly the quantity of the cut. Then on top of this, Saudis are under pressure from President Trump as well who has made one thing very clear; he doesn’t support any production cut, he wants the taps flowing.

Nonetheless, I think that one million barrels per day is the number which is priced in the market so far. If we see production cut over 1.4 million b/d, this could bring some spike in the oil price. Crude price could jump from it’s current level of $51 to $55. As for the other side of the coin, anything less than a million could support the bear case and the price could drop to $45.

Risk warning for retail traders: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74.7 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Risk warning for qualified professional traders: Derivative products are leveraged products and can result in losses that exceed initial deposits. Please ensure you fully understand the risks associated with a professional trading account. Tax laws depend on individual circumstances and may differ in a jurisdiction other than the UK. Tax law may differ in a jurisdiction other than the UK. TF Global Markets (UK) Limited is authorised and regulated by the Financial Conduct Authority, FRN 629628. Registered address: 2 Copthall Avenue, London EC2R 7DA. Company number: 09042646.

Analysis feed

Latest Forex Analysis

Editors’ Picks

AUD/USD: Fresh lows, channel support tested, Golden Ratio in focus

Bears taking out the H&S neckline, target channel support/uptrend at 0.6829. Failures of the channel open risk to 61.8% Fibo and then 0.6755 November low. The risk-off mood in Asia not helping bull's case ahead of key data and an expected rate cut from a dovish RBA.


USD/JPY: Major bull cross fails to inspire Yen bears

USD/JPY is hovering below 110.00 with yen showing resilience, despite the bullish development on technical charts. The S&P 500 futures are hinting at risk reset in the markets. A notable equity market recovery could weigh over yen. 


Coronavirus FX Selloff, CAD Prime for Bank of Canada Breakout?

The most influential story for the financial markets today was reports that the first US case of corona virus has been confirmed. This deadly virus is spreading across the globe creating concerns about the impact on travel and consumer spending.

Read more

Gold: Stays below $1,560 following Tuesday’s bearish spinning top

Gold remains on the back foot while trading around $1,556.90 during the Asian session on Wednesday. The yellow metal portrayed a bearish candlestick formation, backed by bearish MACD, during the previous day.

Gold News

GBP/USD: Aims to revisit 200-hour SMA, immediate support trendline

GBP/USD registers mild losses while trading around 1.3045 during Wednesday’s Asian session. The pair earlier reversed from 50% Fib retracement of its fall from Jan 07 to 14. A two-week-old falling trend line adds to the resistance.


Forex Majors