All Eyes On NFP After Jackson Hole Revelation

Greenback Takes a Dive; NFP Eyed for Tapering Clues

by Bogdan Giulvezan

In a long-awaited speech delivered Friday, Fed Chair Jerome Powell adopted a more dovish tone than most investors were anticipating and the greenback felt the effects, dropping to multi-week lows.

Traders across the globe were waiting to see whether the Chairman would offer some clear clues regarding the tapering of asset purchases during the Jackson Hole symposium, but his remarks only indicated that it could be “this year”. Fed Chair Powell also suggested that the job market needs to improve before the Fed will take action, hence the importance of this Friday’s Non-Farm Payrolls report will be even greater than usual.

Key Events for the Week Ahead

The main event is the NFP scheduled for Friday but before that, we should focus on a few other notable releases: Tuesday, August 31 at 9:00 am GMT, Eurostat will release Eurozone’s CPI Flash Estimate, as well as the Core version of the indicator, which excludes food, energy, alcohol, and tobacco. Although it’s an estimate, the indicator is a gauge of inflation, thus it tends to have a significant impact on the Euro. The forecast is 2.7% for the vanilla version and 1.5% for the Core; higher numbers usually strengthen the Euro.

The Chicago Purchasing Managers’ Index (PMI) will be released later in the same day, at 1:45 pm GMT, followed 15 minutes later by the U.S. Consumer Confidence survey. The PMI is a leading indicator of economic health, while consumer confidence is a leading indicator of consumer spending, thus higher numbers can positively affect the greenback. The expected readings are 68.0 for the PMI and 123.3 for the Consumer Confidence survey.

Friday, September 3 at 12:30 pm GMT, all eyes will be on the Non-Farm Employment Change report (aka Non-Farm Payrolls), which is expected to show that 750K jobs were created during the previous month. As mentioned before, this is always a market-moving event but even more so this time, given Fed Chair Powell’s remarks about the labor market. Do not neglect the Average Hourly Earnings and the Unemployment Rate, both released at the same time as the NFP.

Technical Outlook – EUR/USD

The US Dollar weakened against most of its major counterparts, including the Euro, which allowed EUR/USD to push into 1.1800 resistance. It is now clear that the break of 1.1700 support was false and it looks like the pair will extend past the 50 days Moving Average.

The MACD lines have crossed, indicating a buy trade and now they are pulling apart, indicating an increase in bullish momentum. If price will overcome the 50 MA, we will probably see it climb closer to 1.1900; otherwise, we might get a ranging week, without clear direction, at least until the jobs data comes out.