US NFP: Disappointment May Lead to Adverse Reaction in the USD - TDS

US NFP: Disappointment May Lead to Adverse Reaction in the USD - TDS

Research Team at TDS, suggests that some of the price action in the USD this week partly reflects the optimism expected in headline payrolls and positive calendar effects associated with hourly wages.

Key Quotes

“From that perspective, we think a disappointment in the data, particularly in wages, may lead to a more adverse reaction in the USD. That said, we think that the disappointment in payrolls will have to be rather large—likely a miss of 50k jobs and below consensus wage expectations (given calendar effects)—to exert renewed pressure on the USD.

For this report, we are focused on two crosses—EURUSD and USDCAD. From a technical perspective, the EUR looks to have confirmed a shooting star formed on May 3rd, so we think barring a major disappointment, moderate pressure in the EUR should be sustained. We spot support around the 1.1320/50 area followed by 1.1240/60.

USDCAD will also have to compete with the simultaneous release of Canadian jobs where we expect a moderate increase in hiring though we do see upside risks. This will complicate trading around USDCAD but we think with USDCAD breaking its bearish downward trend channel and putting in good work to carve out a trough, downside should be contained and probably faded. 1.2690 should act as decent support, whereas 1.2830/50 acts as a significant pivot zone but we suspect a solid NFP print will be the catalyst to push USDCAD above 1.29 and confirm our upside bias on the currency pair.”