Big Week For USD: NFP On Watch
Hawkish Fed Expectations
The US Dollar is on watch this week as traders brace for the latest NFP report on Friday. Pricing for a Fed rate hike in October rose to around 70% last week from just above 50% at the start of the week, fuelled by a raft of hawkish Fed commentary. Several policymakers were heard voicing concerns of higher inflation levels becoming entrenched and the need for further policy tightening consequently. Given that the latest dot plot forecasts showed 12 of 18 policymakers forecasting at least one further hike this year, traders are now looking to gauge whether that move will come in October or December.
NFP Forecasts
Looking ahead to Friday’s data, the market is looking for the headline NFP print to cool to 98k from 162k last time. If seen, this will likely fuel some scaling back of October hike expectations, dragging USD lower near-term as traders settle on December as the expected target date. However, if the NFP comes in above forecasts, this could see pricing for an October hike jumping closer to 90%, depending on how strong the print is. If we see an increase from the prior month, this will be firmly bullish for USD with traders taking that as an all-but-certain sign that an October hike is coming.
Technical Views
DXY
The rally in the index has stalled for now into the bear trend line from YTD highs. However, while still above the 100 level and supported by the bull channel, focus is on a fresh test of the summer highs and 101.91 area and a breakout beyond to 103.20 next. If we break sub-100, 99.15 will be the next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.