The infamous US Nonfarm Payrolls report headlines a busy week of economic event risk and sets the stage for strong US Dollar volatility in the days ahead. The first dose of event-driven volatility will likely come on Monday’s US ISM Manufacturing data—historically one of the most market-moving events across the forex market. This past week’s Chicago PMI data came in considerably better than consensus forecasts and sets similarly lofty expectations ahead of the ISM release. It may be especially important to watch for shifts in the ISM Manufacturing employment index ahead of the later-week Nonfarm Payrolls report.
The following days will see the release of potentially significant Pending Home Sales and ADP Employment Change reports. The former is likely to show that pending sales of existing homes pulled back after nine consecutive months of gains, but volatile housing data is notoriously difficult to predict. As such, watch for any surprises and commensurate moves in the US Dollar and other key markets. Subsequent ADP Employment change figures will ostensibly give us a better idea on what to expect for Friday’s NFP numbers and may indeed be one of the most market-moving releases of the week.
Finally, the US Nonfarm Payrolls report is expected to show that employers neither added nor shed jobs through the month of December—what would be the best result since December, 2007. US Dollar risks likely remain to the downside ahead of the data release, however; material disappointments could negate the bullish trend in US employment data. Traders will need to keep a close eye on these key reports and their effect on broader Greenback trends. We have made little secret of the fact that we expect the US Dollar to continue to recover against the Euro through 2010, but fast shifts in Forex Futures and Options market sentiment suggest that the short-term may produce further pullbacks. The coming week should provide a good deal of clarification and make or break the short-tem USD resurgence.- DR
When do you think the dollar will break? Will the next drive be bullish or bearish? Discuss the dollar’s future in the DailyFX Forum.
For more timely FX market analysis, take advantage of the DailyFX Real Time News service.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.
