What We Could Expect for the NFP Report Today; EUR/USD & GBP/USD

The U.S. dollar succeeded to recover slightly against most of the G10 currencies during the Asian trading session, before the non-farm payroll data today.  The U.S. employment report today is one of the most important days each month containing releases that may sharply increase market volatility. It’s worth mentioning that the last few employment reports were closely monitored, as the constant improvement of the labour market led Fed to raise rates in December and keep that optimistic stance. If the tendency continues in that direction, Fed will leave the door open for more gradual interest rate hikes in the near future. A better than expected jobs report could also support the green money as investors and traders seem to lost their confidence for the currency since the beginning of the current year. Against the euro, the U.S. dollar lost about 4 cents, year-to-date, while against the sterling a bit more than 5 cents, since January 17.

The U.S. job growth is likely to have accelerated in January, with wages expected to have increased steadily, suggesting a strong start for the Trump’s administration as he seeks to boost the economy and employment. The data today is expected to show the U.S. economy added 175,000 non-farm jobs in January against the previous 156,000 in December, while the unemployment rate is expected to be unchanged at 4.7%. The widespread expectations are that the new data will beat the market’s forecasts. The ADP data, released on Wednesday, showed a sharp increase in the private sector job positions. The private employers added 246,000 jobs last month, up from 151,000 in December. This indicator generally appears as a precursor to the non-farm payrolls report and brings an early picture of what we would expect for the NFP release.

All sectors of the U.S. economy perhaps will show that they added new working places in January. Manufacturing is expected to show an increase for the second month in a row and the construction sector may also come out with better numbers after the weak figures showed in December.
Except for the NFP data in our focus, today would be also over U.S. average wage earnings and non-manufacturing PMI data that is expected to increase to 57.0. In overall, we believe that the U.S. data expected today will most likely lead U.S. dollar higher against most of the major currencies.

EUR/USD – Levels to Watch

The U.S. dollar is advancing against the euro ahead of the non-farm payrolls data later today. The wide expectations are that U.S. labour market to show significant improvement in January and the data perhaps will support strongly the domestic currency. In the short-term period, we expect a counter-trend movement and EUR/USD to fall further below 1.0740 support level until the diagonal support (uptrend line) near the key level at 1.0670.

MACD is showing a decline, which is adding to the odds that EUR/USD may keep declining. RSI is sloping down and moves below 50 level, supporting the our forecast as well.

In the opposite scenario, if the news does not come out in line with expectation, but worse, we may see dollar to depreciate, driving the pair towards 1.0832 resistance level. A succesfful penetration of that level, will put 1.0940 as our next target.

GBP/USD – Levels to Watch

The green money set under pressure against the sterling prior the NFP data. If we see above expectations prints, as it is widely expected, the U.S. dollar will continue to lead the pair downwards. In the short-term period, we expect that GBP/USD to continue declining with our first target near the rising trendline which coincides with the 1.2420 support level. The pair is likely to penetrate these obstacles and fall until 1.2280 slightly above the 1.2250 strong support barrier.

The three SMAs on the 4-hour chart, 50, 100 and 200 SMA, are not giving a clear signal. MACD is declining below zero line and signals for possible further sell-offs. RSI is sloping down also adding to the odds for GBP/USD decline.

Alternatively, if the U.S. jobs report falls short of forecasts, we may see the pair continuing its uptrend above 1.2580 up to 1.2775 resistance level.