NFP Up Next

All eyes are on the US Dollar today as traders brace for the latest set of US labour market readings. The NFP is forecast to have fallen to just 106k in October, down from 254k a month prior, marking the slowest pace of hiring in four years. Given the negative impact from extreme weather and a widespread labour strike, there are clear downside risks into today’s data which could hit USD sentiment if realised.

Data Forecasts

Alongside the headline forecast, the unemployment rate is expected to hold steady at 4.1% while wages are expected to tick down to 0.3% from 0.4% prior. Last month, USD rallied firmly as an upside surprise in the September jobs report saw traders abandoning expectations of a deeper .5% cut in November. While a .25% cut is widely priced in for this month, the December FOMC is still very much in the air.

Market Scenarios

If we see another upside surprise today, (possible given the low market forecast), this would likely weigh sharply on December rate-cut forecasts, driving fresh buying in USD. On the other hand, if we see a low number as expected today, particularly if any of the readings undershoot, this should see December rate cut pricing creeping higher, capping the USD rally for now ahead of the US elections next week.

Technical Views

DXY

The greenback continues to fight it out around the 104.05 level. While above, focus remains on a test of the bear trend line and 105.97 level next. To the downside, 102.46 will be next support to watch if we slip lower. Risks are evenly split into the data today.