•The dollar was trying to end the week with a firmer tone on Friday as markets scaled back bets on a U.S. rate cut and some speculated that looming jobs data could surprise on the high side.
Adding to the event risk, there are no less than eight Federal Reserve policymakers speaking on Friday. including Fed New York President John Williams and Vice Chairman Richard Clarida.
The dollar has edged higher since Fed Chair Jerome Powell played down the recent slowing in inflation and saw no reason to cut interest rates.
•That helped the dollar index recoup losses from earlier in the week to stand at 97.844 against a basket of currencies, up from a trough of 97.149.
It has barely changed this week, no big surprise given the market has lacked liquidity with Japan and China on extended holidays.
•Against the yen, the dollar was idling at 111.48 having spent the entire week in a snug 111.03-111.89 band.
•The euro was flat at $1.1172, having eased back from a $1.1219 top overnight, though it was still a shade firmer on the week. Eurozone manufacturing surveys released on Thursday showed further contraction in April, but at least got no worse.
•Interest rate futures imply around a 49 percent chance the Fed would cut rates by December, down from 61 percent late on Wednesday. Yields on two-year Treasuries were up 6 basis points on the week so far.
•US DOLLAR TECHNICAL ANALYSIS
On a daily chart, DXY appears to be making an attempt to retest late-April highs after bouncing on former resistance-turned-support at 97.52. The US Dollar thus sits right under June 2017 highs and under the psychological barrier between 98.15 and 98.33. On the whole, the US Dollar has been slowly trending higher this year, guided by rising support from late September 2018.
•USD/JPY: Stuck in a tight range on 111 handle awaiting nonfarm payrolls
USD/JPY was stuck in a range on the 111 handle overnight while the US 10yr treasury yield climbed from 2.50% to 2.56% as bond markets recalibrated to a less dovish Fed outlook as analysts at Westpac noted.
The pair maintains a neutral stance after closing around the current level for a third consecutive day, although the risk is skewed to the downside, as it remains unable to recover ground above the 200 DMA. hovering just below it. In the shorter term, and according to the 4 hours chart, the pair is trading between directionless 100 and 200 SMA, having spent the day attached to the 20 SMA which now gains downward strength. The pair can gain some directional strength either on a break below 111.20 or an advance beyond the 111.70 resistance area.
Support levels: 111.20 | 110.80 | 110.50
Resistance levels: 111.70 | 112.00 | 112.45
•U.S. employers likely maintained a strong pace of hiring in April while steadily increasing wages for workers, pointing to solid economic growth and moderate inflation pressures.
Nonfarm payrolls probably increased by 185,000 jobs last month after rising 196,000 in March, according to a Reuters survey of economists. Early hiring by the government for the 2020 Census and winter storms in the Midwest are wild cards to the forecast.
“The labour market is rock solid,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “It is not overheating and it’s perfect for the Fed to keep interest rates on hold.”
Another month of solid job growth will be further evidence that February’s paltry 33,000 increase in jobs was an aberration. It would also effectively put to rest concerns about a recession and diminish expectations of an interest rate cut this year that had been fanned by a brief inversion of the U.S. Treasury yield curve in March.
•Average hourly earnings are forecast to have risen 0.3 percent in April after edging up 0.1 percent in March. That would lift the annual increase in wages to 3.3 percent from 3.2 percent in March.
Though wage growth is not strong enough to drive up inflation, it is seen sufficient to underpin economic growth as the stimulus from last year’s $1.5 trillion tax cut wanes.
•The unemployment rate is expected to have held steady at 3.8 percent in April as more people searched for work. The jobless rate, around the lowest in nearly 50 years, is close to the 3.7 percent that Fed officials project it will be by the end of the year. Economists say there has been a reduction in the number of people collecting disability benefits, testament to the labour market’s strength.
•Economic commentator Stephen Moore has withdrawn from consideration for a seat on the U.S. Federal Reserve Board after weeks of criticism about his political partisanship, shifting views on interest rate policy, and sexist comments about women.
Moore, 59, was picked by Trump in March to fill one of two vacant positions at the Fed, but had not been formally nominated. Trump’s other pick for the Fed, businessman Herman Cain, withdrew from consideration in mid-April after lawmakers expressed discomfort with the sexual harassment allegations that short-circuited Cain’s presidential bid in 2012. Cain has denied those allegations.
•Japanese Prime Minister Shinzo Abe has said he is ready to meet North Korean leader Kim Jong Un without conditions to end long-running mistrust between their countries, the Sankei newspaper reported on Friday.
Abe’s remarks come days after he met U.S. President Donald Trump in Washington and thanked Trump for raising with Kim, at a February summit, the topic of Japanese people abducted by North Korea.
•Oil prices dipped on Friday, paving the way for a weekly decline as surging U.S. output was expected to start hitting global markets soon.
Brent crude oil futures were at $70.49 per barrel at 0646 GMT, down 26 cents, or 0.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 11 cents, or 0.2 percent, at $61.61 per barrel.
Brent is set for a weekly fall of over 2 percent, while WTI has declined almost 2.5 percent so far, its second straight weekly drop.
•CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices broke trend line support defining the rally from late-December lows. Sellers now aim to challenge a minor downside barrier at 60.39, with a close below that exposing the 57.24-88 area. A dense layer of resistance runs all the way through 67.03. A recovery back above that sets the stage for a retest of the $70/bbl figure.
Reference: Reuters, CNBC , DailyFX, FX Street
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