US Data In Focus
Today’s US labour reports for December hold the potential to drive the first major Dollar move of the year. It's been a quiet start for the greenback as traders await the release of today's data. Earlier in the week, the December FOMC minutes confirmed that the Fed is now firmly in hawkish mode with the bank looking to wind down its balance sheet in the coming months and then begin lifting rates. As of that meeting, the Fed is now projecting three hikes this year, up from two prior. However, the bank noted that movements will remain linked to incoming data and broader developments. With that in mind, there are two way risks to be noted. For USD bulls, this means that should data strengthen ahead of forecasts as we move through the year, these three hikes could become four or, the scale of the hikes themselves might be increased.
NFP Forecasts
Looking at the projections for today then. The headline NFP figure is forecast to come in at 426k, more than double the 210k seen in November. Additionally, average hourly earnings are forecast to tick higher to 0.4% from 0.3%. Finally, the unemployment rate is forecast to fall back again to 4.1% from 4.2% prior.
FX Market Implications
Should we see these projections satisfied, this will be a solid boost for USD at the start of the year. With the Fed fully in favour of pushing ahead with tightening, data is the real key to determining USD price action moving forward this year. Given that many other central banks within the G10 are still firmly fixed on maintaining an easing presence, any US data strength today is likely to further widen the divide between the Fed and central banks such as the BOJ, ECB and SNB. With this in mind, these currencies look probe to greater weakening against USD on the back of any upside data strength today.
Gold Impact
Gold prices are likely to also come under fire if we see a firm USD move on the back of today’s data. With the world fighting to look beyond omicron risks and with lots of positive headlines about the pandemic entering its final stages, gold is likely to see reduced safe haven demand moving through Q1, leaving it more vulnerable to downside shocks on any USD data beats.
Technical Views
USDJPY
The breakout above the 2021 highs has seen the market stalling into a test of the 116.07 level for now. However, with the retail market firmly short the pair and with MACD and RSI both bullish, while price holds above the 115.45 region, the focus is on a continuation higher towards 117.02 next.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.