- A weak ADP surprises the NFP with a low bar
- Fed’s recent comments increase the market’s sensitivity to NFP issuance
The first Friday of the month means only one thing, which is the NFP Friday, and the market’s sensitivity to data has probably increased over the last 48 hours. But first, that To learn more about the NFP report and how to switch it, click here
- The July ADP report fell sharply short of expectations for 330k vs. 695k. Now that the predictive value of ADP for the NFP has become even weaker late, it matters how markets can position themselves in anticipation of the NFP report. Therefore, it sets the NFP bar low to surprise, even if the title is printed as expected, I would expect the green background to pick up.
- Fedi Clarida’s recent comments were more expert than the markets had expected. The vice-president stated that the economy has made progress in meeting the targets and therefore supports a reduction in asset purchases in December 2020. In addition, Clarida noted that he expects interest rates to rise by the end of 2022 if the targets meet his forecasts. In light of these comments, this increases the likelihood that President Powell will use the Jackson Hole Symposium at the end of the month (exactly one year after the announcement of the average inflation target) to provide details of the Fed’s restriction. However, this would mean that this NFP publication may have more riding than it would otherwise have been before Clarida’s comments. Should today’s NFP report go beyond the market consensus, it could in turn give the green light to the JH signal and thus see the USD stabilize at the central bank symposium. As an interim note, bond yields appear to have bottomed out in the short term, providing a layer of green background.
US 10-year return findings short-term base
In addition to the soft ADP report, both ISM Mfg. As well as non-Mfg. the employment indices increased by 3 and 4.5 points, respectively, from the previous month and returned to the expansion territory, which poses some modest risks for the labor market report.
Scenario and FX Outperformer:
- Strong title and details: USD probably works well vs CHF and NZD (front end interest rates are expensive)
- A softer NFP report: USD underperforms vs EUR and AUD (the market is already very short).
Looking at the diagram, the top resistance is 92.45, where 20DMA is located, which also coincides with the 23.6% fib in the YTD range. On the negative side, the support is sitting at a low of 91.80 in July and August.
US dollar Diagram: daily schedule