Talking Points:
- The September US Nonfarm Payrolls report is due to show jobs growth around +200K, following the ADP Employment and ISM Non-Manufacturing/Services reports released earlier this week.
- The DXY[1] Index technical structure has become more bullish in recent days; a retest of the August high is not out of the question.
- Retail traders[2] remain net-long EUR/USD[3] and GBP/USD[4], fading the US Dollar rally.
Looking for longer-term forecasts on the US Dollar? Check out the DailyFX Trading Guides[5].
The US Dollar's recent rally (via the DXY Index) is taking a breather today, ready to snap six straight days of gains ahead of the release of the September US Nonfarm Payrolls report tomorrow. But with US Treasury yields across the curve pushing to multi-year highs, traders have been quick to buy the US Dollar dip. It seems that the September NFP release will do little to break current sentiment around the greenback.
Current expectations for the US jobs data remain modest, even after better than expected ADP Employment (+230K versus +184K expected) and ISM Non-Manufacturing/Services (61.6 versus 58 expected, an all-time high) figures earlier in the week. Bloomberg News' consensus forecast calls for the unemployment rate expected to drop from 3.9% to 3.8%, and the headline jobs figure to come in at +185K. Wage growth is due in around +2.8% from +2.9% y/y.
Using a 10-year rolling model, the ADP report and the ISM Services report can account for 88% of the changes in the NFP figure (R^2 = 0.88). In sum, these proximal trackers of the US labor market correspond with pace of jobs growth between +190K to +220K.
Overall,
