NFPs Up Next

The US Dollar is on watch today as traders prepare to receive the latest US labour market data. Through the week, a lower-than-forecast ADP jobs number as well as rise in weekly jobless claims, has raised possibility of a weaker NFP reading today. Given the pullback we’ve seen in USD from the November highs, the ground is laid for a sharp move lower in USD today if we see a downside surprise. With the prior month printing just 12k jobs and forecasts today set at 218k there is plenty of room for an undershoot. If seen, this should cement expectations for a further Fed rate cut this month, keeping USD pressured lower near-term.

Bearish USD View

Alongside the headline NFP print, traders will also be looking at the unemployment rate and wage growth. The unemployment rate is expected to hold steady at 4.1% while wages are expected to soften to 0.3% from 0.45 prior. If seen, a drop in wages should further add to dovish Fed expectations, keeping USD tilted lower. With rate cut pricing currently around the 70%, a weak showing in todays data should see a jump higher with USD selling off as traders fully price in an additional cut from the Fed this month.

Bullish USD Risks

Of course, if we see an upside surprise in today’s data, there is room for USD to move higher as rate-cut forecasts fade. We’ve heard mixed views from Fed officials recently, showing that there isn’t complete support for a further rate cut this month. As such, any upside surprise will likely be taken as a sign that the Fed will hold off cutting when it meets this month, paving the way for a fresh USD rally.

Technical Views

DXY

The rally in DXY has stalled for now into the 107.25 level. However, the subsequent correction has so far failed to break below the 105.97 or back below the broken bear trend line. While this area holds as support, focus is on a fresh push higher. Back below there, however, focus turns to 104.05 as next support.