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Forex: US Dollar, Japanese Yen Brace for Volatility on Payrolls Data

By , Currency Strategist
04 April 2014 05:05 GMT

Talking Points:

  • US Dollar to Find Support on an Upbeat Nonfarm Payrolls Print
  • Yen May Rise if Fed QE Cutback Outlook Spooks Risk Sentiment
  • New Zealand Dollar Outperforms in Otherwise Quiet Asian Trade

All eyes are on March’s US Employment report in the final hours of the trading week. Expectations suggest the world’s top economy added 200,000 jobs, amounting to the largest increase since November. Leading ISM data points to a sharp pickup service-sector hiring over the same period, arguing in favor of an upbeat outcome. Such a result is likely to help erode doubts about the continuity of the Fed’s QE “tapering” cycle, bolstering policy support for the US Dollar and driving the benchmark currency higher.

The sentiment-linked implications of Fed stimulus withdrawal represent another important dynamic. A survey of economists polled by Bloomberg shows the markets’ expectations for global economic growth have been revised sharply lower over recent weeks. If investors perceive further withdrawal of policy support for the world’s top economy as amplifying the risk of a larger global slowdown, an upbeat report may weigh against risk appetite. That may send the Japanese Yen higher as traders unwind carry trade positions funded in the perennially low-yielding currency.

The New Zealand Dollar narrowly outperformed in otherwise quiet overnight trade, adding as much as 0.2 percent on average against its leading counterparts. The move may have reflected corrective profit-taking after the Kiwi fell for a third consecutive day to hit the lowest level in two weeks against its US counterpart. An overnight advance in S&P 500 futures may have likewise helped, allowing the New Zealand unit to revel in its positive relationship with the risk benchmark courtesy of the most robust policy outlook in the G10 FX space. Indeed, traders are pricing in 118 basis points in RBNZ tightening in the 12 months ahead.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

No Data

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German Factory Orders n.s.a. (YoY) (FEB)

6.8%

8.4%

Medium

6:00

EUR

German Factory Orders s.a. (MoM) (FEB)

0.3%

1.2%

Medium

7:00

GBP

Halifax House Prices (MoM) (MAR)

0.6%

2.4%

Medium

7:00

GBP

Halifax House Prices (YoY) (MAR)

9.4%

7.9%

Medium

7:30

EUR

German Markit Construction PMI (MAR)

-

53.6

Low

8:00

GBP

New Car Registrations (YoY) (MAR)

-

3.0%

Low

8:10

EUR

German Markit Retail PMI (MAR)

-

52.1

Low

8:10

EUR

Euro-Zone Markit Retail PMI (MAR)

-

48.5

Low

8:10

EUR

French Markit Retail PMI (MAR)

-

48.4

Low

8:10

EUR

Italian Markit Retail PMI (MAR)

-

43.1

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3527

1.3634

1.3677

1.3741

1.3784

1.3848

1.3955

GBP/USD

1.6430

1.6520

1.6559

1.6610

1.6649

1.6700

1.6790

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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04 April 2014 05:05 GMT