Bears jumping the gun ahead of NFP – OCBC

Currency markets were somewhat jittery overnight amid mixed US data. Missing ADP jobless estimates (99,000 vs. 145,000 estimate) caused USD weakness, but the later release of jobless claims (227,000 vs. 230,000) rebounded in response. But the USD fell further after ISM services data came in largely in line with estimates

NFP is already weighing on the USD

“This morning, the Fed’s Goolsbee said it’s pretty clear the path is not just rate cuts soon, but multiple cuts over the next 12 months, as the Fed projected in its latest chart. He also warned that he saw “more” warning signs of a cooling job market and how the lingering weakness raises the possibility that the cooling job market “could turn into something worse.” That said, he also said he wouldn’t put too much weight on the one-month job number.”

“The focus is on the payrolls report (830pm SGT), in particular, NFP and the unemployment rate. The USD should remain sensitive to jobs data this week as the Fed’s focus shifted to supporting the labor market. An NFP print that is much hotter than expected and a much lower than expected unemployment rate should see the comfortable bets relax and support the USD. A much weaker report raises further concerns about a cooling labor market. This can undermine feelings. De-risking trades can put pressure on high-beta FX.”

“A data that comes broadly in line with estimates would be a case of no good, no bad. This supports the soft landing story. US stocks may find a relief rally, while the USD may return to trading near its lows. This scenario is likely to be the least disruptive to the markets. DXY was last at 101. Daily momentum is slightly bullish but RSI has declined. Price consolidation action ahead of data risk. Support at 100.50 levels. The decisive break puts the next support at 99.60. Resistance at 101.70 (21 DMA), 102.20 (23.6% fibo retracement from 2023 high to 2024 low).”