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NFP in focus

All eyes are on the US Dollar today as traders get ready for the release of February jobs data. On the back of a string of bumper labor reports over recent months, the market is expecting a cooler set of readings today, particularly following a softer-than-forecast ADP number earlier in the week. In terms of the numbers, Wall Street is looking for the NFP to slow to 198k from 353k prior with wage growth set to dip to 0.2% from 0.6% prior and the unemployment rate remaining unchanged at 3.7%.

Bearish Outlook

If such a drop is confirmed, particularly the drop in wage growth, this should keep USD pressured near-term. The Fed continues to tout the line that it will keep rates high as long as possible, downplaying near-term easing risks. However, traders know how quickly the bank’s outlook can shift and a weak reading today will be seen as bumping up the chances of a H1 rate cut, particularly if readings undershoot these forecasts.  In this scenario, USD is likely to trade firmly lower with risk assets seen rallying across the board.
 

Bullish Risks

Obviously, the risk today is that the data comes in above forecasts. Given the low bar in terms of forecasts, there is ample room for an upside surprise. If seen, this should help shore the Dollar up near-term, fuelling some profit taking in risk markets.
 

Technical Views

DXY

The sell-off in USD has seen the market breaking down below the 103.48 level. With momentum studies bearish, price is now set on a downward path while we hold below that level. 101.22 sits as the next key downside target. Should we move back above 103.48 today, focus will turn back to 104.95. 

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