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

Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. 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

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.