A Battered US Dollar Eyes the NFP for a Much Needed Oomph

It’s NFP Week Again and The Dollar Is Back In The Spotlight

By Bogdan Giulvezan

Friday’s positive Eurozone data came as a surprise for analysts and market participants alike. Among a multitude of green numbers, Eurozone’s CPI Flash Estimate (year over year) showed a reading of 2.2%, above the forecast of 2.0%, while the U.S. Core PCE Index disappointed by showing a 0.4% change (previous 0.5%, anticipated 0.6%).

Despite better than expected EU data and worse than expected US data, Friday was the only bearish day of the week for EUR/USD, which some have speculated that it was due to profit-taking after a bullish week.

This week’s USD price action will be mainly affected by the U.S. jobs data, which is always a market-moving release but even more so this time, due to the remarks made last week by Fed Chair Jerome Powell who said that the job market still has “some ground to cover” and rate increases are “a ways away“.

Key Events for the Week Ahead

The economic week opens with the US Manufacturing PMI scheduled for Monday at 2:00 pm GMT. The index acts as a leading indicator of economic health and is derived from the opinions of about 300 purchasing managers from the Manufacturing sector. The forecast for this release is 60.8, with higher numbers potentially strengthening the greenback.

Wednesday, August 4 the Services PMI will be revealed at 2:00 pm GMT but before that, at 12:15 pm GMT, Automatic Data Processing Inc. will reveal their version of the Non-Farm Employment Change, which is a report that tries to mimic the Non-Farm Payrolls data that comes out 2 days later. The anticipated change is 645K and although the impact can be significant, it is usually lower than that of the NFP.

The main event of the week is of course the Non-Farm Payrolls release, scheduled for Friday, August 6 at 12:30 pm GMT. The forecast is 895K, while the previous change was 850K and higher numbers can boost the US Dollar, especially considering Jerome Powell’s remarks regarding the job market.

Technical Outlook – EUR/USD

After a substantial run, that took the pair more than 100 pips higher, EUR/USD showed signs of weakness during the final trading day of last week. However, the bullish run may not be over yet, as it still has room to extend higher, considering that the MACD lines are well spread apart and pointing up, while the RSI is nowhere near overbought.

If the pair will continue to climb, the first target and barrier will be the 50 days Moving Average, followed by the resistance at 1.1970. For now, the outlook remains bullish from a technical perspective but of course, a lot will depend on the economic data released throughout the week.