Mixed US Jobs Data
Near-term Fed rate-cut expectations have moved lower on the back of Friday’s jobs data. Despite the headline NFP print falling sharply below forecasts at 143k vs 169k, there were some firmly bullish inputs in the mix, with the unemployment rate falling to 4% from 4.1% prior and wage growth rising to 0.5% from 0.3% prior. Additionally, the prior two sets of NFPs were revised higher with the December figure pushed up above the 300k mark.
Rate-Cut Expectations
On the back of the data, CME rate-cut pricing has fallen in both May and June with July now pegged as the first option for a cut. Looking ahead this week, focus will turn to inflation with the latest US CPI data due on Wednesday, expected unchanged at 2.9% year-on-year. Given the hawkish details in Friday’s jobs report, any upside surprise in Wednesday’s data will be firmly bullish for USD with traders likely to further scale back Fed easing expectations if annualised CPI tops 3% again.
Market Scenarios
In this scenario, a stronger US Dollar is likely to feed into weaker risk appetite with stocks and commodities to come under pressure. On the other hand, if we see a downside surprise in Wednesday’s data, this should revive near-term rate-cut pricing, leading USD lower through the week.
Powell Comments Due
Finally, traders will also be watching Fed’s Powell who gives his semi-annual testimony to congress this week. Unless we hear any clearly dovish guidance from Powell, his comments are likely to keep USD underpinned for now, particularly if accompanied by any upside inflationary surprises.
Technical Views
DXY
For now, the index continues to range between support at 107.24 and resistance at 109.35. The move can still be viewed as a correction against the prior bull trend with focus remaining on an eventual break higher while support holds. Topside, 110.86 is the next bull target. If we break lower, however, 105.97 and 104.59 are next supports to watch.
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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.