Weekly Analysis: Non-Farm Payrolls – The Last Major Employment Data of the Year
Weekly Analysis: The US Dollar showed modest gains in the beginning of last week but the pair then climbed on the back of U.S. political turmoil. Overall price action was choppy and characterized by reversals on the lower time frames.
The pair is supported by a bullish trend line that will probably push price into the key resistance at 1.2000. On the other hand, if the bears manage to break this trend line, we will most likely see a drop into the 50 days Exponential Moving Average where the next direction will be decided. The pair’s behavior this week will be heavily influenced by the U.S. political scene and by the jobs data released later in the week.
The week starts off slow, without any major releases scheduled Monday, while Tuesday the only notable economic data will be the U.S. Non-Manufacturing PMI (also called Services PMI), which is a survey that shows the opinions of purchasing managers regarding business conditions in the Services sector.
Wednesday action picks up and we take a first look at United States jobs situation, with the release of the ADP Non-Farm Employment Change. The report shows the estimated change in the number of employed people in the U.S., apart from the farming sector and government. A larger number of employed people indicates that consumer spending is likely to pick up in the near future and this in turn strengthens the currency.
Thursday ECB President Mario Draghi will hold a press conference in Frankfurt at the Bank of International Settlements and the economic week will end Friday with the most important U.S. employment data: the Non-Farm Payrolls. This report shows changes in the total number of employed people in the U.S., excluding the farming industry and has a very strong impact on the US Dollar. Higher numbers strengthen the currency because employment is a leading indicator of consumer spending, which in turn represents a hefty part of overall economic activity.
Renewed optimism regarding Brexit negotiations took the pair above long term resistance (1.3450), reaching a weekly high at 1.3550. Some rejection was seen during the last day of the week but momentum is still on the buyers’ side.
The bias is bullish but the pair is capped by last week’s high at 1.3550 and the Relative Strength Index is entering overbought territory, warning that a deeper retracement south may follow. If early in the week the bears can break 1.3450, we may see a move back into the 1.3320 zone but on the other hand, if 1.3450 becomes support, we will probably see a move into 1.3600 area.
The week is rather slow for the Pound, with only a few notable releases. The Construction PMI and Services PMI will come out Monday and Tuesday respectively, showing the opinions of purchasing managers regarding business conditions in their sector.
The last announcement of the week is the Manufacturing Production scheduled Friday. This indicator shows changes in the total value of goods produced by the manufacturing sector and has a positive impact on the Pound if it posts a higher than anticipated reading; the opposite is true for a lower reading. As always, the U.S. releases will have a direct impact on the pair’s movement.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 7-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.