Fade dollar weakness on soft NFP Fade dollar weakness on soft NFP Fade dollar weakness on soft NFP

Fade dollar weakness on soft NFP

Forex 3 minutes to read
Michael O’Neill

FX Trader, Loonieviews.net

Summary:  Yesterday we heard the Fed fretting about persistently sluggish inflation, which is why it's a good idea to check out tomorrow's non-farm payrolls data, especially the wage inflation element.

Traders are getting ready for another manic nonfarm payrolls Friday. The US is expected to have added 180,000 jobs in April, slightly worse than the 198,000 gained in March. The unemployment rate is predicted to be unchanged at 3.8%, and average hourly earnings are forecast to rise 0.3% compared to the March increase of 0.1. The headline data may be less important to the Fed then the details.

The Fed’s statutory monetary policy objectives are maximum employment, stable prices, and moderate long-term interest rates. In 2012, the Federal Open Market Committee said that “inflation at the rate of 2 per cent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve’s statutory mandate.”

In November 2018, the Federal Reserve of San Francisco said that at 3.7%, the US had achieved full employment, concluding the US economy was operating at or beyond its full potential. The 10-year Treasury yield is 2.53% which looks to be a moderate long-term rate. The US CPI rate drifted between 1.5% and 1.9% y/y since January and is expected to rise 2.1% y/y in April. 

The Fed seems to be meeting its objectives.

 Fed Chair Jerome Powell blamed low inflation on “transitory” issues yesterday. Wage inflation helps his case and supports the view that rate cut risks are exaggerated. Better than expected wage inflation data would go a long way in negating the impact of a weaker than expected headline number. If so, it may be prudent to look for levels to buy US dollars.

EURUSD broke below the 61.8% Fibonacci retracement level of its April 2017-January 2018 range of 1.0579-1.2540 which points to a test of the 76.4% level of 1.1040 eventually.

Wall Street is modestly higher in early trading with traders appearing not overly bothered by Fed Chair Powell’s slightly more hawkish comments at his press conference, compared to the FOMC statement. That could be because the China/US trade talks are seemingly closer to a positive conclusion.
Chart: EURUSD daily. Source: Saxo Bank


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992