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US Dollar May Decline if Payrolls are Anything Less Than Stellar

US Dollar May Decline if Payrolls are Anything Less Than Stellar

2014-09-05 06:36:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points:

  • US Dollar May Correct Lower if Payrolls Prove Anything Less Than Stellar
  • Dovish Commentary from FinMin English Sank NZ Dollar in Overnight Trade
  • See Economic Releases Directly on Your Charts with the DailyFX News App

Currency markets are likely to look past a quiet European economic calendar to focus on the much-anticipated release of Augusts’ US Employment data. The report is expected to show that the economy added 230,000 jobs, topping July’s 209,000 increase. US economic news-flow has dramatically outperformed relative to consensus forecasts over recent weeks, suggesting analysts are underestimating the vigor of the world’s largest economy and opening the door for an upside surprise.

With that in mind, leading survey data is a bit disconcerting, suggesting the pace of growth in the service sector – the largest employer in the US – slowed for the third consecutive period last month. Meanwhile, the markets have become heavily skewed on the long side of the US Dollar as prices test 12-month highs. That suggests the greenback may be asymmetrically responsive to a downside surprise versus the alternative, with even a meager downside surprise threatening to touch off profit-taking and fuel a sharp downward correction.

The New Zealand Dollar underperformed in overnight trade, falling as much as 0.3 percent on average against its leading counterparts. The move came against a backdrop of dovish rhetoric from Finance Minister Bill English, who said he expects the Kiwi to fall against its US namesake as pressure on interest rates in the island nation moderates while inflationary pressure proves weaker than expected. English added that weak dairy prices represent a “downside risk” for the economy.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

AiG Perf of Construction Index (AUG)

55.0

-

52.6

23:50

JPY

Official Reserve Assets ($) (AUG)

1278.0B

-

1276.0B

5:00

JPY

Leading Index (JUL P)

106.5

107.1

105.9

5:00

JPY

Coincident Index (JUL P)

109.9

110.1

109.7

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German Industrial Production (MoM) (JUL)

1.9% (A)

0.4%

Medium

6:00

EUR

German Industrial Production (YoY) (JUL)

2.5% (A)

-0.4%

Medium

6:30

AUD

Foreign Reserves (A$) (AUG)

-

62.7B

Low

7:00

CHF

Foreign Currency Reserves (AUG)

455.8B

453.4B

Low

7:15

CHF

Industrial Output (YoY) (2Q)

1.5%

0.5%

Low

8:30

GBP

BoE/GfK Inflation Next 12 Mths (AUG)

-

2.6%

Medium

9:00

EUR

Eurozone GDP s.a. (YoY) (2Q P)

0.7%

0.7%

Medium

9:00

EUR

Eurozone GDP s.a. (QoQ) (2Q P)

0.0%

0.0%

Medium

9:00

EUR

Eurozone Household Consumption (QoQ) (2Q)

0.3%

0.2%

Low

9:00

EUR

Eurozone Gross Fixed Capital (QoQ) (2Q)

-0.6%

0.2%

Low

9:00

EUR

Eurozone Government Expenditure (QoQ) (2Q)

0.2%

0.7%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.2538

1.2772

1.2858

1.3006

1.3092

1.3240

1.3474

GBPUSD

1.6104

1.6240

1.6285

1.6376

1.6421

1.6512

1.6648

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

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