Global macro analysis for 02/02/2018

USD needs perfect data composition if it wants to reverse the pessimistic market sentiment towards it. Employment increase by 148k in December was disappointing not only with the consensus (190k), but also with regard to 252k in November and 211kin October. Strong readings in previous months were mainly dictated by the reconstruction of jobs after the "hurricane" of September, so difficult to sustain. In addition, individual information from the economy suggests that due to the pre-holiday shopping season stores in November increased employment, as a result, December data were understated. Stabilization of the situation should allow reflection in January. Consensus for 180k it is only slightly above the average for the last 6 months (166k). The ADP report already published indicated an increase in employment in the private sector by 234k, which indicates a positive surprise at the Friday's reading. On the other hand, air temperatures in January were lower than average and some states experienced weather anomalies and large snowfall. This could disrupt the activity in the construction sector, thereby understating the employment reading.

Weaker data can be read as the first signs of labor market deterioration, which will be a prelude to the economic slowdown. This would mean that the Fed is running out of time to continue monetary policy normalization and the market has no reason to raise expectations for the number of interest rate hikes in this cycle.

Let's now take a look at the US Dollar Index technical picture at the H4 time frame before the NFP Payrolls figures are released. The market is still inside of the horizontal zone between the levels of 88.45 - 89.62 and only a valid breakout above or below one of this levels will give a clearer indication of the potential future move. The next technical support in case of a downside breakout is seen at the level of 87.60 and in a case of a rally the next technical resistance is seen at the level of 89.62.


The material has been provided by InstaForex Company -