Today's US session was one for those who enjoy watching paint dry. But tomorrow is NFP day and may be yet another day for a USD inflection point.
Today's session was hardly one for the history books, though we did see fairly strong moves in NOK (in support of the interest rate spreads favoring the currency as we have noted in recent days) and in SEK off the back of the Riksbank interest rate hike and guidance. EURUSD and the other major USD pairs failed to follow up on yesterday's exuberant move higher in respect of the upcoming US employment report and ISM non-manufacturing report tomorrow.
Nonfarm payroll expectations and reactions
Some have lowered expectations for US nonfarm payrolls due to the weak ADP release (soon we'll be dropping the "private payrolls" figure, which remains the focus, once the rest of these pesky census workers are fired). The Saxo call (see a great report on the release here: is for a virtually unchanged figure versus a slightly more positive consensus. The market is already very short the USD, but risk is made a sharp comeback yesterday, which pushed the dollar lower. It feels like we're in need of direction here after so many days of aimless trading in EURUSD and whippy trading in the more risk-correlated AUDUSD, but will we get any kind of resolution in tomorrow's trading? It's tough to build any conviction in this environment. For now, risk appetite measures are generally very complacent.
Some have lowered expectations for US nonfarm payrolls due to the weak ADP release (soon we'll be dropping the "private payrolls" figure, which remains the focus, once the rest of these pesky census workers are fired). The Saxo call (see a great report on the release here: is for a virtually unchanged figure versus a slightly more positive consensus. The market is already very short the USD, but risk is made a sharp comeback yesterday, which pushed the dollar lower. It feels like we're in need of direction here after so many days of aimless trading in EURUSD and whippy trading in the more risk-correlated AUDUSD, but will we get any kind of resolution in tomorrow's trading? It's tough to build any conviction in this environment. For now, risk appetite measures are generally very complacent.
It is perhaps worth noting the reactions to the last three US employment reports.
July Report: the market sold the greenback very lightly after the July employment report on August 6 (in which private payrolls were out at +71k vs. +90k expected and the Jun. data was revised -50k lower). But that was at the tail-end of a weak move in the USD and that very day marked the low of the greenback against the Euro, the Aussie and other currencies. (EURUSD slid from 1.33+ to 1.25 in the subsequent two weeks.).
June Report: in the case of the June US employment report released on July 2, in which payrolls also fell short of expectations, though the unemployment rate improved to 9.5% instead of leaping to the 9.8% expected, the initial reaction was very modest, but the USD sold off heavily in a virtually straight line some days later as risk appetite continued to recover.
May Report: by far the most disappointing of the three reports (payrolls rose +41k vs. 180k expected) on , the release came in an environment of weak risk appetite and was released on June 4. It kicked off a brutal two day slide in the risk, which boosted the USD, but June 7 was the top for the greenback for the year.
Let's not forget that the important ISM non-manufacturing survey is also up tomorrow. It has been largely stable since peaking out in March of this year despite other ugly data coming out of the US. An ugly deceleration is needed in this index if we are to believe that the US economy is really gathering downside momentum rather than simply flattish at the moment. Also - the biggest mover off the report tomorrow could be the treasury market and therefore the Japanese yen, which remains the highest beta currency out there.
Chart: AUDUSD
Here we simply market the three dates of the last nonfarm payroll reports on the AUDUSD chart. They have certainly come close to interesting inflection points on all three occasions and that may be the case yet again this time around despite the cynicism the market often heaps on this monthly number due to to the way it is calculated.
Here we simply market the three dates of the last nonfarm payroll reports on the AUDUSD chart. They have certainly come close to interesting inflection points on all three occasions and that may be the case yet again this time around despite the cynicism the market often heaps on this monthly number due to to the way it is calculated.
Stay careful out there
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