NFP Anticipation. Will It Sway the Fed Rate Decision?
EUR/USD Stuck in a Tight Range: What Will Trigger the Breakout?
Last week’s focus was mainly on inflation but overall we didn’t see any major directional developments. The Dollar Index (DXY) and EUR/USD traded mostly sideways, with the Core PCE Price Index showing the forecasted reading of 0.4% and the Eurozone Core CPI coming out at 3.1%, above the expected 2.9% but still lower than the previous 3.3%.
This stubborn EU inflation is likely to push the ECB rate cut further into the year and as far as the US Dollar is concerned, the always-important jobs data that’s due this week will offer important clues regarding the Fed’s plans. According to CME’s FedWatch tool, currently, the probability of a cut at the March meeting is a mere 5% and it’s safe to assume that we won’t see any major surprises.
Economic Calendar Highlights
The economic week starts with the ISM Services PMI scheduled for Tuesday at 3:00 pm GMT. It shows the opinions of purchasing managers regarding overall business conditions in the Services sector and has a medium-to-high impact on the greenback.
Fed Chair Powell will testify Wednesday at 3:00 pm GMT before the House Financial Services Committee about the Semi-Annual Monetary Policy Report. Thursday at the same hour he will testify again on the same topic but this time before the Senate Banking Committee.
Also Thursday, the ECB will announce the Main Refinancing Rate at 1:15 pm GMT, followed at 1:45 pm GMT by ECB President Lagarde’s press conference. There’s a very low probability that the ECB will tinker with the rate but the press conference may trigger volatility.
The main event of the week and the biggest market mover will be released Friday at 1:30 pm GMT: the Non-Farm Employment Change (aka Non-Farm Payrolls, NFP). Last month the forecast was 187K and the actual was 353K. This month, the forecast is almost identical: 190K. Probably we won’t see such a big miss two months in a row but anything is possible. Either way, this release is always accompanied by big moves, so buckle up.
Technical Outlook – EUR/USD
After the rejection at the 50-day MA, the pair failed to reach the support at 1.0775 and instead traded sideways. This behavior hints that market participants are somewhat undecided about what to do next. Both sides are waiting for a breakout, a clear rejection, or an event that would reveal the next direction.
And that event may very well be the U.S. jobs data that will be released this week. Unless Jerome Powell’s testimony reveals something important about the Fed’s monetary policy, we will probably have to wait until Friday for the NFP report to come out.
Just be aware that a strong break of the 50 MA or the support at 1.0775 could trigger additional movement in the direction of the break, even before the jobs data comes out.
