Dollar and Stocks Shine in November – Focus Shifts to NFP
EUR/USD Recovery Faces Resistance. Downtrend Still in Play
Wall Street closed November with the biggest monthly gain in a year, supercharged by Donald Trump’s win at the beginning of the month. Optimism and hopes stemming from his proposed tax cuts, higher import fees, and deregulation boosted U.S. stocks throughout the whole month of November.
The greenback also had an amazing month against most of its peers, with the US Dollar Index (DXY) climbing in November from 103.40 to a high of 108.07. The last week was influenced by the celebration of Thanksgiving, which brought thin USD trading volumes on Thursday. The PCE Price Index released a day before, notched higher on a year-to-year basis but the monthly figure was in line with expectations.
All eyes this week will be on the US Non-Farm Payrolls (NFP) report, which will shine a light on the state of the U.S. job market and the overall performance of the economy.
Economic Calendar Highlights
The ISM Manufacturing PMI will be the first notable release of the week, scheduled for Monday at 3:00 pm GMT. FOMC member Waller will speak the same day at 8:15 pm GMT about the economic outlook at the American Institute for Economic Research Monetary Conference. Despite the late hour, this speech may trigger volatility due to the topic and the fact that Waller is a FOMC voting member so he has a direct say regarding the interest rate.
Wednesday at 1:15 pm GMT, the ADP Non-Farm Employment Change report will come out and although it is not as important as the government-issued NFP, it still can affect USD pairs. At 6:45 pm GMT, Fed Chair Powell will speak at the New York Times DealBook Summit. It will be an interesting opportunity to hear his thoughts regarding the U.S. economy and the pace of the rate cuts.
The final and probably most important event of the week is scheduled for Friday at 1:30 pm GMT: the Non-Farm Payrolls report. It shows the change in the number of employed people during the previous month, excluding the farming industry, and is the main gauge of the health of the labor market in the U.S. Also, job creation is a leading indicator of consumer spending, which accounts for the biggest part of the overall economic activity.
Technical Outlook – EUR/USD
After piercing the support at 1.0350, the dollar bulls took a much-needed breather and the pair bounced higher, clearing the oversold condition. In roughly two months, the pair dropped from 1.1200 to 1.0350 with just a brief retracement at 1.0775, so the current bounce was expected.
The current rally will likely keep its momentum as long as the pair is trading above 1.0500. If this support is broken, the downtrend may resume. We may get some sideways movement until the NFP release, which could be a deciding factor for the next medium-term direction.
