US Dollar Technical Posture Improving Ahead of Nonfarm Payrolls

– Both USDOLLAR and DXY Indexes making significant progress.

– US NFPs tomorrow don’t need to be a blowout to be USD-positive.

– See the for the week of October 2 to October 7.

After a batch of ‘glass half-full’ data yesterday, the is sitting pretty ahead of tomorrow’s US labor market data release. While the ISM Services report for September was impressive, posting the largest single month-over-month gain in the data series’ history, the ADP Employment reading was rather flat around +150K.

Regardless of which print you want to focus on, both point to the same conclusion: the September NFP report will probably be another one of the ‘Goldilocks’ variety. Pundits will point out that headline NFPs below +200K is a warning sign, but several Fed policymakers, including Chair Janet Yellen, disagree. If you look at how Fed policy has evolved over the past two years, Fed officials have indicated from time to time their belief about what the ‘breakeven jobs growth rate’ would be for NFPs. Approximately two years ago, Fed officials were saying it was around +150-+175K; recently, they’ve said it’s closer to +100K as the economy has neared full employment.

Tomorrow, if we see only a middling NFP print, it still may be good enough to keep the Fed on track to raise rates by December. With US elections just days later, November seems unlikely for the next 25-bps hike; and the December meeting will produce new staff economic projections, which the Fed has showed preference to have in hand when making changes to its policies.

See the video (above) for technical considerations in , , , , , , and the USDOLLAR Index.

— Written by Christopher Vecchio, Currency Strategist

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