Traders will turn their attention back to fundamentals from geopolitics in the final trading session of the week as key US employment data is released that could see some significant changes in Fed rate move expectations, especially if it combines with a peace deal with Iran. Rate cut hopes have been pushed back in the last few months as energy prices surges have led to inflationary fears in the US and around the globe, however if those fears are pulled back and we see a weakening in the labour market, then we could see rate cuts come back onto the table for the Federal Reserve Bank.
The market is expecting the headline Non-Farm number to show a 65k increase over the last month, well down from last month’s surprise 178k print, with the Average Hourly Earnings pipping up to +0.3% month-on-month and the Unemployment rate to remain steady at 4.3%. A weaker than expected result would we welcomed by investors and the incoming Fed Chair alike and should see some sharp downside moves in the dollar, however, another topside surprise could hit those rate cut expectations further and see the greenback rally strongly.
The Euro is nicely poised from a technical perspective coming into the data with good levels near that market that traders will be using to trade over the data release. A weaker number or 30k or more lower than expected should see the dollar hit a would see the Euro challenge strong trendline resistance and recent highs near the 1.1800, with breaks here and at the April high likely to lead to a fresh assault on the 1.200 level again, whilst a higher surprise should see the pair hit with strong support coming in just below the 1.1700 area, with bigger moves likely to test longer-term support under 1.1600.
Resistance 2: 1.1850 – April High
Resistance 1: 1.1796 – Trendline Resistance and May High
Support 1: 1.1704 – Trendline Support
Support 2: 1.1679 – 200-Day Moving Average
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