August 6, 2021 9:38:39
NFP to guide the Fed
The first Friday of the month means the release of the all-important US non-farm payrolls report. Bloomberg consensus for the headline number now sits at 858k from 925k at the start of the week. This is essentially due to the shocking ADP report, but that isn’t a great predictor for the main NFP number. Unemployment is expected to fall to 5.7% from 5.9% in June.
Fed Chair Powell has stated he wants to see strong jobs growth, but the Delta variant may hamper this going forward. A good July report will fuel Fed hawks and tapering expectations with a one million print seeing a bid to the dollar versus the euro and yen especially. Any number below 400k will cast more doubt on when the Fed normalises policy with less jobs data available before Jackson Hole and the next FOMC meeting.
Revisions to the prior months are always worth keeping an eye on in these volatile times. There is also typically a big seasonal decline in July, but this may not potentially show up this year due to unemployment benefits in 25 states declining sharply.
EUR/USD rolling over
The euro is looking fragile ahead of the main event of the week. The minor downtrend over the past week is continuing today with the big 1.19 barrier capping any price rises. The cross of the 50-day and 100-day SMAs adds to the downside pressure. (We had highlighted the “death cross” a few weeks ago as the potential for a breakdown). A strong NFP will see the floor around 1.1750/60 tested with major support at 1.1704, while EUR/GBP will aim for the April low at 0.8472.
AUD/USD trying to push higher
The aussie is struggling to hold above 0.74 even as RBA Governor Lowe sounded cautiously optimistic overnight. A big risk event(!) is needed to break above this resistance as prices have tried to push beyond here on several occasions. If bulls can gain a solid foothold with a strong weekly close, then they will aim for 0.7476/77 and 0.75. Sellers of this major will be lurking otherwise on soft data, with first support at 0.7316 ahead of the recent cycle low at 0.7289.
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