EUR/USD steady ahead of NFP
Fawad Razaqzada December 2, 2016 7:38 AM
Now today’s focus is on the US jobs report which should cause noticeable volatility in the markets, especially if the numbers deviate from expectations by a sizeable margin. It would take a really bad report – and I am talking about net job losses – to deter the Fed from hiking rates at its meeting later this month. Anything other than that may not cause the dollar to weaken significantly, although there is a possibility that it will close the day lower anyway because a rate hike is basically priced it. I think the market is waiting to see what the Fed is thinking about in terms of the future path of interest rates. How many, if any, rate rises will there be in the first half of 2017, for example.
Apart from the dollar and the Fed, the focus next week will be on three other central banks: RBA, BOC and ECB. Speculation that the ECB is thinking about tapering QE early and/or not extending it beyond its intended March 2017 end date has supported the euro and undermined European equities recently. Mario Draghi, the ECB president, may shed some light into this at his press conference on Thursday. So until then, the EUR/USD may be able to hold its own above that critical 1.05 support, regardless of how strong or otherwise the NFP will be today. That is our base case scenario now. If so, the fibre could break above last week’s high of 1.0660 decisively before rallying towards 1.0850/80, the last swing low prior to the breakdown.
The alternative scenario is that the EUR/USD will break decisively below the critical 1.0460-1.0525 area at the second time of asking. If this were to happen then the EUR/USD could start its next leg lower towards 1.02, and eventually parity. Will it happen today? Who knows, but we would probably need to see a very strong set of numbers in the jobs report. But the most likely trigger for a potential breakdown will probably be the ECB next week or the Fed the week after.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.