US Jobs Up Next

The stage is set for plenty of volatility in the US Dollar today as traders prepare to receive the latest US jobs report. Better US data across the week has seen the Dollar rallying with DXY trading back up to test the YTD highs as traders scaled back Q1 rate-cut expectations. Today’s jobs data is now seen as decisive for whether the Fed is likely to cut again in March or hold off until Q2 at the earliest. As such, USD is vulnerable to a strong move in either direction today if we see a surprise on either side of the forecast.

Bullish USD Risks

Looking at the projections for the day, the market is looking for the headline NFP at 164k from 224k prior. The lower estimate creates room for an upside surprise with the strongest reaction likely to be seen if the NFP tops the prior month. In this scenario, March rate-cut chances are likely to fall drastically with the first Fed cut being moved out to June, leading USD firmly higher near-term.

Neutral & Bearish View

On the other hand, if we see the forecast satisfied, USD is likely to remain supported though the scale of buying will likely be less with March rate-cut forecasts likely to remain around current levels. Finally, if we see a downside surprise today, this will likely see March rate-cut expectations being rebuilt, weighing on USD near-term. As such, today should be pivotal for USD direction over the rest of January.

Technical Views

DXY

For now, DXY remains stalled at the 109.35 level, still within the bull channel. Momentum studies have flattened a little here though bullish pressure remains and focus is on a breakout higher and a test of the 110.86 level next. Downside, 107.25 remains key support along with the bull channel lows.