Putting USD Correction into Perspective Post-GDP, Pre-NFPs
- EURUSD trades down to former resistance turned support, daily 8-EMA.
- USDJPY breakout gathers pace - easiest path forward for USD.
May seasonality calls for US Dollar gains, but Friday's NFP release will be the ultimate determinant of the buck's direction. The lingering net-long US Dollar position held by speculators in the futures market alongside disappointing US economic data from Q1'15 leave the greenback in a vulnerable place, particularly if the April jobs report disappoints: the strength of the labor market was truly the engine of the US Dollar appreciation since last July (vis-a-vis rising interest rate expectations).
Accordingly, without a strong April Nonfarm Payrolls report, the view that the economic weakness see last quarter was more permanent and less transitory could be embraced, which would most likely lead to investors reducing Fed rate hike expectations further, and dampening the probability of the May seasonal rebound in the process.
See the above video for technical considerations in EURUSD, GBPUSD, AUDUSD, and USDJPY.
--- Written by Christopher Vecchio, Currency Strategist
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