With the Dollar on course for a second straight weekly advance investors will focus their attention on the Non-Farm Payrolls report today. Depending on the way the data prints the Dollar will either continue further to the upside or take a break and consolidate a bit lower. Equities had a negative day yesterday but this morning futures on either side of the pond are pointing towards a marginally positive opening bell.
The Dollar's price action will largely hinge on the way the US NFP report comes out but here lies the big risk for the greenback. The recent robust performance of the labor market suggests that this month's reading could come in at around 185k jobs added; however, with Hurricane Florence having taken its toll on the US last month this figure could come in significantly lower. As such, a miss in the NFPs and on the equally important wage growth component might force the Dollar to push lower.
The Dollar/Yen is usually the best currency pair to trade the NFPs and with prices having retreated to test the 113.50 level, a miss could open the door for a deeper correction. The key support for the currency pair lies around the 113 level and as long as prices remain above this then the uptrend holds true. Otherwise, a penetration of this support will prompt traders having been long to take profits off the table and send the greenback towards the 112.50 area versus the Japanese currency.
The Euro and the Pound have come off their lows over the past 24 hours and depending on how the Dollar trades today this might be an opportunity for a stronger recovery. With the Euro climbing above 1.15 overnight a weak performance from the US currency will allow prices to trend towards the key 1.16 resistance which seems to cap the short-term potential for the shared currency. In terms of the Pound, yesterday's price action saw Sterling move back above 1.30 and an extension of this rally - in case of a miss in the NFPs - will propel prices towards the 1.31 to 1.32 level.
Gold seems to have entered a consolidation phase near the top end of its broad $1,190 -1,210 range and this may suggest that a break above this key resistance is imminent. Definitely a weak NFP printing today would prompt Gold to move to the upside but the $1,210 ceiling looks hard to be breached today. Oil on the other hand traded lower yesterday as we had suggested earlier in the week; while the bias remains positive, Oil prices have been in an overbought state for some time and a correction only seems reasonable. As long as Oil trades above the $74 area, the upside potential is still there and prices may eventually move into the $77 area of focus.
Finally, equities seem poised for a marginally positive opening bell when London comes online even though the Asian markets are trading slightly in the red. Investors will be looking towards the Non-Farm Payrolls data for evidence that the US labor market remains on a positive trajectory and should this be the case, then stocks will look to pick up pace again.
MARKET EVENTS TO WATCH
- US Non-farm Payrolls - 4.30pm
- US Average Hourly Earnings - 4.30pm
All times are GMT +4.
Written by Konstantinos Anthis, Head of Research