On Friday at GMT 01:30 PM, the US Nonfarm payroll and the unemployment rate figures will be released. The market is waiting patiently for this upcoming risk event. Some of the major pairs like the EURUSD and GBPUSD are trading in a range for last two days, and eyeing the Nonfarm payrolls data for the next move. This is one of the major risk events for this week. The recent concerns of the emerging market have caused some selling in the indices. There are few signs of risk aversion noted, as the pairs like USDJPY dipped lower towards the 101.00 level, and still struggling to gain some ground. The EURCHF pair also traded a touch lower marking the strength in the CHF. In short, the safe heavens gained some traction during this week.
Now, we need to see how the market reacts to the upcoming NFP numbers. Earlier during the week, the data which was released in the US came as a disappointment. The US ISM manufacturing PMI slipped from the 57.0 to 51.3 level, missing the expectations of 56.4. This was a healthy miss, and the US dollar was quick to go on the back-foot after the release. The official statement highlighted that “the Manufacturing expanded in January as the PMI registered 51.3 percent, a decrease of 5.2 percentage points when compared to December’s seasonally adjusted reading of 56.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting”
Another thing to look into is the ADP National Employment report, which also missed the expectations. It registered a gain of 175K jobs compared to the 227K in December, and missing the expectations of 180K. The Carlos Rodriguez, president and chief executive officer of ADP points that “The U.S. private sector added 175,000 jobs in January, which is in line with the average monthly growth throughout 2013”. However, after the release, the US dollar was seen losing some ground against most of the major currencies.
All the recent data will weigh a lot on the upcoming Nonfarm payrolls. The market is expecting a gain of 185K in January, compared to the 74K in December. The December reading was a bad miss, and the argument made for the outcome was the bad weather. We need to see whether there is a positive print this time or not. We need to be very careful this time, as the ongoing risk aversion moves may also play its part after the data release.
Furthermore, the US unemployment rate is expected to remain at 6.7%. Last time the unemployment rate dipped 0.3% from 7.0% to 6.7%, which gave a reason for the fed to consider tapering. If the unemployment rate remains stable, then the fed might again taper in the coming meetings. A lot will also depend on the Nonfarm payrolls. Any reading below the 150K could trigger some pressure on the US dollar, as the odds of tapering in the coming meeting decreases. However, no one knows what’s in store for us. The Fed might still go ahead with another taper despite of NFP miss.
Other than this, we have two central bank meetings scheduled today. The ECB and the BOE interest rate decisions are on tap. The BOE is expected to leave policy unchanged, and no one is expecting any surprise from the BOE. We need to keep a close eye on the ECB, as they may surprise us in the upcoming meeting. It would also be interesting to note the things that the ECB President points in the press conference. So, keep an eye on all these events.
Technically, the EURUSD managed to hold to the 1.3480 support level. The pair also traded as high as 1.3554 level after the ADP data release. There is a down-move trend line, as can be seen in the 4 hour chart shown below. The trend and resistance coincide at around the 1.3580 level. This level may act as a strong barrier for the pair in the short to medium term. On the downside, we need to see whether the pair can manage to hold the 1.3480/60 area or not. A break of this level may trigger more losses for the pair towards the 1.3400 level.
So, take note of these levels friends while trading.
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Happy Trading Friends!
