US NFP Looms as the Potential Game Changer

U.S. Dollar Trading (USD) we stand on the edge with many pairs with EUR/USD eyeing 1.100 and USD/JPY flirting with the huge Y100 level in the Asian session Friday. Expectations for +175k are well above last months shockingly low +38k and this is seen as reasonable although still a little optimistic given the last months the trend has been lower. Revisions will be extremely important and a negative headline outcome may prove difficult to trade. Of course the initial reaction to weak numbers will be USD weakness but the next move may well be for USD safe haven buying if stocks are sold off. Traders need to watch the stock market reaction closely after the initial move to make smart trading decisions.

The Euro (EUR) The festering banking crisis in Italy and concerns over Deutsche bank are capping the EUR/USD in recent sessions. The ECB is expected to annouce new easing at the next meeting but at this point it may be similar to the BOJ with policymakers pushing on a piece of string.The Sterling (GBP) Post Brexit volatility is continuing with the pair failing to hold its squeeze back above 1.3000 and back in the lower 1.2900 region. 1.2800 low f is safe for now but a strong NFP may be enough to tempt sellers to test this level once again. Profit taking seems the only reason to be buying at the moment and usually you wait for new lows before taking a counter trend position.

The Japanese Yen (JPY) USD/JPY is struggling to keep its head above water with sellers relentless in the recent few sessions. A strong US ADP last night failed to inspire much of a move and this is not a good sign for the bulls hoping for a sharp reversal from tonight's NFP number. A break and close below Y100 today will lead to a multitude of bearish analyst calls next week and really test the BOJ/MOF resolve in coming sessions to stem the pain.The Australian Dollar (AUD)​ AUD/USD is shrugging off negative news from multiple angles and is holding at 0.7500 as we close the Asian session. The S&P negative watch yesterday and sharp fall in OIL has been ignored so far but a strong NFP tonight would be harder to ignore and could lead to major downside supports being broken. NZD/USD is even more precarious over extension as it surged ahead on a perceived hawkish RBNZ speech yesterday.

Stocks Indices(DAX) Failed to sustain a small mini rally to 9500 and we have closed on a weak footing with banking concerns leading to some divergence from US stock markets which are holding up better. FTSE is actually rallying as the fall in GBP makes the relative price in USD of UK stocks more attractive to international investors. US Stocks (DOW) Remains well supported on Dips and is actually still in striking range of all time highs above 18000. The outcome of the NFP will be interesting with strong numbers opening the door to a rate hike this year. This could in turn to lead to downside in stocks in coming weeks.

Pairs to watch

USD/JPY to break Y100 or put a longer term bottom in?

EUR/USD time to pick a new trend?


Economic Data Ahead

June NFP Forecast at 175k vs. 38k previously.

June Unemployment Rate forecast at 4.8% vs. 4.7% previously

By Anthony Darvall (TonyD)