Today, the report on the labor market from the agency ADP was disappointed, after which the market raised concerns about the dynamics of official figures, which will be published tomorrow. In the absence of political news drivers, the market switched its attention to macroeconomic statistics, which could affect the resolve of members of the US regulator.
Let me remind you that past Nonfarms went worse than expected, after which market participants again became nervous about the prospects for tightening monetary policy this year. In July, only 157 thousand jobs were created, this is the weakest result since March this year. In general, the downward trend is traced from May, so if tomorrow Nonfarms also go below the forecast values, then we can already talk about a certain trend.
By the way, if you believe the report by ADP, then in August, only 163 thousand jobs were created. It is worth acknowledging that the data of this agency does not always coincide with official figures, but, as a rule, ADP serves as a true barometer of the labor market. Moreover, most often, the positive dynamics are not confirmed, while the decrease in the growth in jobs is almost always confirmed. This explains the reaction of the dollar index to the release published today. Earlier in the morning, the index was in the area of 95.40, whereas at the moment, it fell into the framework of 94 points.
However, not only the weak ADP report affected the dynamics of the US currency. Today, the final estimate of the level of labor costs was published. This indicator measures the annual rate of the employer's expenses per employee. And although the index is very late (traders attach more importance to the monthly data on weekly pay), it still has some influence on the market. Moreover, for the first time in a year, it fell into the negative area, and the revised data only confirmed a negative trend (-1% instead of the initial -0.9%).
In other words, the labor force in the US has become somewhat cheaper, and this fact may negatively affect the dynamics of inflationary growth in the country. In this context, tomorrow's figures on wage growth play an important role. According to preliminary forecasts, the level of the average hourly wage will remain on the figures of July, that is, at the level of 0.3%. If the indicator goes worse than predicted values or falls into the negative area (which is unlikely), the dollar will be under rather strong pressure. Here, it is worth recalling that at the end of August, Fed Chairman Jerome Powell, speaking at a symposium in Jackson Hole, said that at the moment, there are no "clear signs" of accelerating inflation above two percent. In the light of these words, the dynamics of wage growth is of great importance, since it can influence the resolve of the FRS members.
At the moment, the market estimates the probability of raising the rate to 2.25% at the September meeting (26.09) one hundred percent, that is, fully confident in this step. But the chances of a December increase (up to 2.5%) are 73%. Such high interest rates mean that any doubt about the rate hike at the latest meeting of the Fed this year will put very strong pressure on the dollar. Therefore, Friday Nonfarms can cause high volatility in the EUR / USD pair, if such thoughts on the Fed's uncertainty return to the market.
From the technical point of view, the pair EUR / USD on the daytime timeframe broke through the middle line of the Bollinger Bands indicator, and also crossed the Tenkan-sen line and almost, the Kijun-sen. In other words, the indicator Ichimoku Kinko Hyo almost formed the signal "Golden Cross", which indicates the priority of long positions. For full confidence in this, the pair should be fixed above 1.1640. The closest resistance levels are located close to each other, marking 1.1660 and 1.1680 (which correspond to the lower and upper boundaries of the Kumo cloud). If the price overcomes and fixes above the above levels, the next price target will be 1.1780, this is the top line of the Bollinger Bands indicator on W1.
In case tomorrow's Nonfarms support the dollar, we should expect a price pullback, up to support level of 1.1545 (that is, to the Bollinger Bands midline on D1). This level of support is very stable, as the pair have already tried to pass lower this week, however unsuccessfully. For a breakthrough to the base of the 15th figure, more powerful news drivers (for example, the escalation of the trade war with China or the strengthening of geopolitical tensions) are needed. If we talk about the "working" trading range EUR / USD, then it can be limited to the levels of 1.1545 - 1.1660.
