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NFPs Undershoot Forecasts
The US Dollar is looking a little more stable on Tuesday after Friday NFP-driven sell-off saw the DXY finding support into lows, trading back above the 104.95 level for now. The greenback came under heavy selling pressure into the end of last week as traders digested the details of the latest US labour market data. The headline NFP release was seen falling to 175k from 303k prior, well below the 234k the market was looking for. Additionally, wage growth was seen falling to 0.2% from 0.3% prior while the unemployment rate rose to 3.9% from 3.8% prior.
Fed Easing Expectations
The data marks the first drop in the NFP reading since last year. The data has fed into a move lower in USD with traders sensing that Fed easing expectations will likely take on fresh focus in the coming months. Continued robust growth in the US jobs market has been one of the key drivers of the bullish USD story in recent months. With jobs seeing a sharp slowdown in growth and with wages weakening too, traders will now be closely watching incoming inflation and inflation-linked data. The Fed has signalled its desire to press ahead with easing, but is so far being hindered by sticky inflation. With jobs growth slowing now, however, a fresh drop in inflation should see traders bringing forward Fed easing to September again, weighing on USD.
Technical Views
DXY
The correction lower in USD has stalled for now into a test of the 104.95 support, still within the bull channel. While this region holds, the focus is on a further move higher and a fresh test of the 107.04 level next. To the downside, bull channel lows will be next support ahead of structural support at 103.48.
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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.