Nonfarm Payrolls: Expect the Unexpected
The US economy is expected to have added roughly 200,000 new jobs in April, way too optimistic, given these last few day's macroeconomic releases. Adding
to a quite disappointing US growth in the first quarter, as the
advanced GDP reading came in a 0.5%, was a relatively soft ADP survey,
showing that the private sector added just 156,000 new jobs in April,
below the 200K expected. The backdrop in GDP, was largely attributed to
softening consumer spending. Also, US productivity fell again in
Q1 after declining by the end of 2015, with the hourly output per worker
down by a 1.% annual rate. Late April, the Commerce Department reported
that personal consumption expenditures (PCE) price index, excluding the
volatile food and energy components, edged up 0.1% in March after an
upwardly revised 0.2% increase in February. Personal income rose
modestly but spending fell below expected, suggesting consumption will
remain subdued, as salaries are not growing enough. A
positive note came from the ISM non-manufacturing PMI employment
sub-component, up in April 2.7 percentage points to 53, from the March
reading of 50.3 percent and indicates growth for the second consecutive
month. Overall, the US economy is clearly in trouble, and even if
the April employment report beats expectations, speculative interest
will be watching how wages performed before rushing into buying the
greenback. If wages remain low there's no chance of up
ticking inflatio. This will take a June rate hike out of the table and
therefore send the dollar back south. The unemployment rate is
expected to remain steady at 5.0% while average hourly earnings are
expected to have advanced 0.3% monthly basis. A reading above 0.5%,
alongside with a steady unemployment rate and in-line with expected jobs
creation, could boost the latest recovery of the greenback,
particularly against the EUR and commodity related currencies. A
conflicting release on the other hand will see the market spiking up and
down to initial headlines to finally go accordingly to salaries'
results.
EUR/USD levels to watch
The EUR/USD pair erased all of its weekly
gains ahead of the NFP release and stands a few pips above the 1.1400
level, losing its upward potential according to the daily chart, as the
pair shed over 200 pips pretty much straight after topping at 1.1615
mid-week. The pair is quite close to a major support in the 1.1370/80
region and a break below can see the pair down towards the 1.1300 price
zone, en route to 1.1260. The report should be an extreme positive
surprise in all of its sub-components to see the pair reaching this
last.
The 1.1460 price zone has become once again the immediate
resistance, followed by the 1.1530 level. Should the advance extend
beyond this one, the pair is then expected to continue beyond the
mentioned 1.1615 high and advance towards the 1.1710 level next week.
USD/JPY levels to watch
The USD/JPY pair will probably see large
movements after Payrolls, particularly after Japanese markets will
resume activity after a three-day holiday this Friday and investors will
be eagerly ready to play with it.
Dollar's demand has helped the
pair bounce from a multi-year low of 105.54, but the technical stance
is still bearish in the daily chart, as the Momentum indicator has
resumed its decline within negative territory. The price is far below
its 100 and 200 SMAs and it seems unlikely that even with a strong
Nonfarm Payroll report the pair can recover up to the shortest,
currently at 113.20.
Anyway, the main support is now 106.60,
followed by 106.00, and the mentioned low at 105.54. A decline down to
this last one is possible on a poor employment report. A steady advance
above the 107.60/80 region, where the pair has several daily lows from
late March/early April, could see the recovery extending towards the
109.00 price zone on a positive surprise.
