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5 Jul 2013
NFP amid low liquidity; drastic moves ahead?
FXstreet.com (Barcelona) - On the back of a fresh dovish stance by the European Central Bank, the market is getting ready for the NFP fireworks, amid low liquidity markets on a long-weekend in the U.S. due to July 4th Independence day.
In view of Chris Capre, Founder at 2ndSkies, "it will be quite interesting considering the already unusually low levels of liquidity."
This month's unemployment figures are of especial interest, as the market gears up for what many have coined 'Septaper', also know in a more conventional way as the reduction of assets purchases by the Federal Reserve starting September. Since the forward guidance was introduced and the QE taper directly linked to job market improvements, investors and traders are every month watching closely on the headline numbers, with consensus expectation this month at 170K.
Ilian Yotov, FX Strategist and Founder at AllThingsForex, notes "A decent NFP report will raise the odds that the Fed could reduce the size of its monthly asset purchases sooner than expected and could give the USD a boost."
According to Alexandra Estiot, Senior Economist at BNP Paribas, and interviewed by FXstreet.com: "Non-farm payrolls are likely to have kept increasing steadily in June, as weekly initial claims remain on a downside path... The US economy weathered so far the fiscal drag remarkably. The effects of the sequester remain difficult to estimate, but those spending cuts are markedly less important than the rise in taxes implemented earlier this year. After the mild slowdown in job creations recorded in April, and the following rebound, we expect non-farm payrolls to have once more accelerated in June, with around 180k new positions added during the month."
Slightly differing from Estiot's view is Sean Callow, FX Strategist at Westpac, who says the Bank expects 145K. The Strategist points at the tricky months of seasonals as a factor to take into account, noting "payrolls have disappointed consensus by an average -39K over the past 10 years." On the jobless rate, Callow looks for a tick down to 7.5% after May’s rise to 7.6%.
On the possible USD reaction, Callow thinks "is likely to be positively correlated with the headline divergence from consensus", so from Callow's perspective, "if we are right on NFP then there should be some modest USD/majors selling." However, since US data has been strong irecently, "we doubt there will be substantial or sustained damage to USD from the report" Callow added.
Chris Capre, who has maintained an overall bearish stance in the EUR/USD for a few weeks now, suggests selling the pair around 1.2975. As Capre notes, "it could be a perfect storm to cause a very drastic move in the markets. Traders now can look for sell signals around 1.2975 targeting 1.2850 and 1.2775 to trade in line with the bearish trend."
Kathy Lien, Co-Founder at BK Asset Management, also believe, this time from a fundametal standpoint, that since the ECB "is screaming their bias to ease from the top of the mountain - they don't want to leave any room for ambiguity because the risk could be a further rise in yields - the next support for the EUR/USD should be at 1.28.
In view of Chris Capre, Founder at 2ndSkies, "it will be quite interesting considering the already unusually low levels of liquidity."
This month's unemployment figures are of especial interest, as the market gears up for what many have coined 'Septaper', also know in a more conventional way as the reduction of assets purchases by the Federal Reserve starting September. Since the forward guidance was introduced and the QE taper directly linked to job market improvements, investors and traders are every month watching closely on the headline numbers, with consensus expectation this month at 170K.
Ilian Yotov, FX Strategist and Founder at AllThingsForex, notes "A decent NFP report will raise the odds that the Fed could reduce the size of its monthly asset purchases sooner than expected and could give the USD a boost."
According to Alexandra Estiot, Senior Economist at BNP Paribas, and interviewed by FXstreet.com: "Non-farm payrolls are likely to have kept increasing steadily in June, as weekly initial claims remain on a downside path... The US economy weathered so far the fiscal drag remarkably. The effects of the sequester remain difficult to estimate, but those spending cuts are markedly less important than the rise in taxes implemented earlier this year. After the mild slowdown in job creations recorded in April, and the following rebound, we expect non-farm payrolls to have once more accelerated in June, with around 180k new positions added during the month."
Slightly differing from Estiot's view is Sean Callow, FX Strategist at Westpac, who says the Bank expects 145K. The Strategist points at the tricky months of seasonals as a factor to take into account, noting "payrolls have disappointed consensus by an average -39K over the past 10 years." On the jobless rate, Callow looks for a tick down to 7.5% after May’s rise to 7.6%.
On the possible USD reaction, Callow thinks "is likely to be positively correlated with the headline divergence from consensus", so from Callow's perspective, "if we are right on NFP then there should be some modest USD/majors selling." However, since US data has been strong irecently, "we doubt there will be substantial or sustained damage to USD from the report" Callow added.
Chris Capre, who has maintained an overall bearish stance in the EUR/USD for a few weeks now, suggests selling the pair around 1.2975. As Capre notes, "it could be a perfect storm to cause a very drastic move in the markets. Traders now can look for sell signals around 1.2975 targeting 1.2850 and 1.2775 to trade in line with the bearish trend."
Kathy Lien, Co-Founder at BK Asset Management, also believe, this time from a fundametal standpoint, that since the ECB "is screaming their bias to ease from the top of the mountain - they don't want to leave any room for ambiguity because the risk could be a further rise in yields - the next support for the EUR/USD should be at 1.28.