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US Dollar Bounces as NFP Misses Target: Powell on Deck

US Dollar Bounces as NFP Misses Target: Powell on Deck

2019-10-04 14:13:00
James Stanley, Currency Strategist
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US Dollar Talking Points:

  • This morning’s NFP report disappointed on a number of fronts, with both the headline number and Average Hourly Earnings missing estimates. The positive from the report was a continued decline in the unemployment rate to 3.5%
  • The US Dollar gained on the back of this morning’s NFP, likely owed to the low expectations ahead of the release. The day is not done yet as FOMC Chair Jerome Powell speaks at 2PM ET.
  • DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

US data continues to disappoint after a couple of negative ISM releases earlier this week led into this morning’s NFP report. And perhaps that pessimism was already well priced-in but the US Dollar has put in a bounce after this morning’s data printed below expectations, setting the stage for a speech from FOMC Chair Jerome Powell a little later today.

US Dollar 30-Minute Price Chart

us dollar 30 minute price chart

Chart prepared by James Stanley; US Dollar on Tradingview

On the reaction front, an interesting item remains in EUR/USD after the currency was rejected at a confluent area of resistance, taking place around the 1.1000 handle in the pair.

EUR/USD Four-Hour Price Chart

eurusd four hour price chart

Chart prepared by James Stanley; EURUSD on Tradingview

US Dollar: Q4 Reversal to Continue?

Coming into the fourth quarter and US Dollar strength remained on full display. The currency jumped up to fresh two-year-highs on the first day of Q1, finally finding some element of resistance around 10am on Tuesday morning as another disappointing manufacturing ISM report was released. This was coupled with a tweet from President Donald Trump shortly after, and rather than summarize that I’ll just leave that below.

Trump Tweet

More Bad US Data

That one-two combo of bad manufacturing numbers combined with additional focus on the matter from President Trump helped to push USD lower during Tuesday and Wednesday trade, and on Thursday, yet another worrying item was released with services ISM disappointed. This prodded sell-offs in both USD and US equities, bringing to light the possibility of a repeat of last year’s Q4.

On October 3rd of last year, FOMC Chair Jerome Powell remarked in an off-hand comment that he felt that the neutral rate was ‘a long way’ off. This was widely-inferred to mean that the FOMC had plans for continued rate hikes, and in short order markets turned-over as risk aversion went on full-display into the Christmas holiday.

The Fed even hiked in December, which only seemed to hasten the declines. It wasn’t until Fed-speak began to get more dovish that order was restored in equities, and this happened throughout Q1 and Q2 and, eventually, the Fed began to cut rates in Q3. But while doing so, Powell also said that the move was a ‘mid cycle adjustment.’ Another cut took place in September and, again, Powell refrained from committing to any additional moves of loosening.

Throughout this process the build of a rising wedge formation became rather clear, and that formation remained through the Q4 open. This is part of the reason why the forecast for USD was set to bearish in the Q4 technical forecast on the US Dollar, and this theme will remain center-stage for this afternoon’s speech with Chair Powell, set to take place at 2PM ET.

US Dollar Weekly Price Chart

us dollar weekly price chart

Chart prepared by James Stanley; US Dollar on Tradingview

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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