Global macro overview for 07/08/2017

Global macro overview for 07/08/2017:

The Friday's NFP Payrolls report from the US was the first in a long time that did not disappoint investors. The headline NFP number was released at the level of 209k while market participants expected 183k jobs. The unemployment rate decreased to 4.3% from 4.4% and the average wages rose by 0.3% as expected.

The strong payrolls growth, falling unemployment, and firmer wages growth is good news and with the PPI and CPI scheduled for reease this week, we could see growing support within the Fed officials for additional rate hikes. The market is currently looking for the headline PPI to rise to 2.3% from 2% (core PPI to rise to 2.1% from 1.9%) while Friday's CPI report is predicted to rise to 1.8% from 1.6%. If the data is beaten, then global investors might realize, that only one potential interest rate hike in December 2017 is a too cautious estimate and might start to price in another two hikes next year. That would give the US Dollar another lift up across the board.

Let's now take a look at the US Dollar Index technical picture at the H4 timeframe. A strong upwards reaction after the NFP data release can not be equated with an automatic trend change. The sentiment against the US Dollar was recently extremely negative. Positive surprise by the labor market report for July is just the first step to reversing the depreciation trend - the market based on one 180 degree data will not change its extremely pessimistic attitude. So far, the process of correction of extreme positioning has started. The more extreme it is, the stronger the reaction would be. The nearest technical resistance is seen at the level of 94.47.

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