The EUR/USD and the Nonfarm Payroll Report

Today, markets are already heading for the next milestone. In Europe, there are only some second tier eco data on the agenda. So, this morning, markets can further make up their mind on the impact and consequences of yesterday’s ECB announcements. For now, the new step of the ECB was not enough for EUR/USD to break above key technical resistance levels. Such a move is still possible but of late markets had already anticipated on yesterday’s ECB message.

So, it is not that evident that yesterday’s step of the ECB will still create enough momentum for EUR/USD to attack the key 1.2693/1.2748  resistance, especially as the activation of the plan might still take quite some time. It will also be interesting to see the reaction from other officials on the ECB action.

This morning Asian markets kept a positive tone. The risk on sentiment was partially supported by yesterday’s ECB announcement. In addition, China said that it would stimulate the economy via construction and infrastructure projects. This was supported sentiment in risk further. However, the impact on EUR/USD is limited. The pair is holding a tight range near yesterday’s close

Different interpretations might cause markets to doubt on the implication of the plan. Later in the session, the focus will turn to the US labor market report. Yesterday’s data were USD supportive, but at that time, the focus was still on Europe. The consensus for today’s payrolls is not that high (130 000). It is far from evident that one (slightly) better than expected will be enough for the Fed the change its view on the need for more policy stimulation.

However, a reasonably good figure might a least trigger some end-of-week profit taking on the recent EUR/USD rally. On the other hand, it would be interesting to see whether a weaker figure will be enough for EUR/USD to go for a further up leg. For now, we don’t preposition for such a move.

Most of today’s focus will be the US nonfarm payroll print, which will have large implications for the USD and the FOMC decision. Traders will begin to position themselves ahead of the release. Based on leading indicators such as the ADP payroll report and the unemployment claims data, it looks like the nonfarm should be pretty close to forecast, which will support monetary stimulus.

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