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Trading plan for 01/09/2017:
The financial markets across the globe are waiting for the NFP Payrolls data today, so the overnight developments were very limited. Among the major currencies, the changes are minor with the best CAD performance after impressive GDP data from yesterday. At the other end is SEK and CHF. The stock market extends positive sentiment from the US and Europe.
On Friday 1st of September, the main event in the economic calendar is, of course, NFP Payrolls release during the beginning of the US session. Nevertheless, before that, a series of Manufacturing PMI's from across the Eurozone will be released during the London session (the UK PMI will be presented as well). The US job market data are scheduled for release as usual at 12:30 pm GMT: Unemployment Rate, Non-Farm Employment Change, Average Hourly Earnings, and Participation Rate data will all be released at once.
US Dollar Index analysis for 01/09/2017:
The US job market has been performing at a top level for some time now. Nonfarm payrolls rose 209k in July following a 231k gain in June and a 145k increase in May. That leaves the average monthly gain for 2017 at 184k, broadly in line with that of 2016. The market participants expect the August NFP figure to be released at the level of 180k, but due to the very strong ADP reading from two days ago (237k vs. 185k) the data might easily beat the expectations. Given the fact, that US job market is now 'past' full employment, this is a very strong pace of job growth which should begin to ease soon. On the other hand, the vast majority of global investors is not paying that much attention to the NFP figures itself but is focusing on wages growth. The main problem investors see in the assessment of the Fed's monetary policy (and the US outlook) is the weakening CPI inflation that is not supported by wage pressure. The post-recession salary peak growth at 2.9% fell in December 2016 and since then the rise in nominal wage has been slowing. Disappointment would translate into a lower valuation of the probability of a Fed interest rate hike in December which now is at the 40% according to CME Group FedWatch Tool.
Let's now take a look at the US Dollar Index technical picture on the H4 time frame. The market has failed to break out above the golden trend line around the level of 93.30 and fell towards the nearest technical support at the level of 92.54. Todays NFP data might have an important impact on the market participants' behavior. We would expect, that data in line with the consensus to be inadequate to stop the market from closing long positions in USD built in the last dozen or so hours. On the other hand, way better than expected data would immediately make the price to break through the trend line and hit the technical resistance at the level of 94.16. If the data disappoints, then the downside reaction towards the recent lows is unavoidable.
Market Snapshot: USD/JPY bounces from support
The price of USD/JPY is likely to make a return to the upper band of consolidation zone around 109.75, which is supported by the 38%Fibo retracement. It is, therefore, possible to return to the uptrend and a resumption of resistance at the level of 111.00. Break out above this resistance will be a confirmation of a return to the upward trend. In this case, another resistance should be sought at 112.19. If the level of 109.75 is violated, then the price might fall to the level of 108.60, which earlier prevented the decline several times.
Market Snapshot: Gold fails again at 127% Fibo
The price of Gold had been rejected again from the level of $1,321, which is 127%Fibo Extension of the previous swing down. The immediate support is seen at the level of $1,308 and $1300, but any violation of the $1,300 round number will result in much deeper correction towards the level of $1,280.
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