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Dollar Outlook Ahead of Non-Farm Payrolls

by on December 6, 2013 4:32 am GMT
 

The dollar sank today as data out of the US was better than expected. The greenback fell against the majority of its major peers and the markets gear up for tomorrow’s non-farm payroll and unemployment rate.

“If you get a number around 160,000 or below and no change in the unemployment rate, then you would see the US dollar selloff quite sharply,” said Emma Lawson, senior FX strategist at National Australia Bank Ltd. The risk has been to the downside, but the seasonality effect is likely to produce a  better than expected payroll report.

Earlier this week, the ADP employment report indicated 215K jobs added in November opposed to the expectations of 172K. Seasonality may bring the non-farms up to 220K with the unemployment rate dropping to seven percent (factoring the current participation rate). However, notice how between 200-215K seems to be the resistance line when regarding employment.

Employment currently is roughly within the same range when compared to before the recession.

ADP Employment 2002-Current

ADP Employment 2002-Current

Non-Farm Payrolls 2002-Current

Non-Farm Payrolls 2002-Current

The dollar stumbling after falling through the bottom of a descending triangle. Price action closed near the bottom of the range, and the drop facilitated a 20/50 EMA bearish crossover. Price action is looking to trade down to 80.13, and the dollar should see increasing pressure as the data release looms.

Positive data allows the market to speculate for a December taper, although it is still very unlikely. However, that will be good news for the dollar. Good data should punch the dollar back to 80.90, while a selloff will initiate a move to 79.65.

1D Chart of DX

1D Chart of DX