Dollar Falls After Weak Non Farm Payroll
The jobs report released today is generally weak. Non-farm payroll growth in Apr slowed to 88k, missing expectation of 100k and being the lowest since Nov 04. Prior month’s data were revised lower with Mar down from 180k to 177k. More importantly, Feb’s job growth was also revised down from 113k to 90k. With the downward revision, we now have 2 months of sub-100k NFP this year which is clearly a sign of weakness in the job markets. Unemployment rate rose back from 4.4% to 4.5%. Average earnings slow to 0.2% mom, 3.7% increase. After yesterday’s data that showed moderation in wage growth, today’s data suggest that wage pressure could continue to reduce in the upcoming months .
Technically speaking, market actions are pretty like what happened recently. There are some pressures on dollar after weak data, but the fall in dollar is not disaster panic selloff type and majors are still mostly kept in range so far. While further downside will likely be seen today in the greenback, some near term support levels are needed to be closely monitored to confirm that dollar’s recent rebound has completed. Otherwise, short covering of greenback in the larger trend could still be in force.
USD/JPY
Daily Pivots: (S1) 120.11; (P) 120.28; (R1) 120.59;
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USD/JPY retreats sharply in early US session on broad based dollar weakness. Touching of 119.97 minor support, with 4 hours MACD dragged below signal line, indicates that a short term top is formed at 120.45. Outlook is turned consolidative and further retreat towards 4 hours 55 EMA (now at 119.60) is in favor as long as USD/JPY stays below 120.45 high. However, downside should be contained by 119.02 cluster support (50% retracement of 117.60 to 120.45 at 119.03) and bring rally resumption. Above 120.45 will indicate rise from 117.60 has resumed for next upside target of 122.17 high.
In the bigger picture, note that firm break of falling trend line resistance (now at 119.30) and sustained trading above 119.48 fibo resistance (61.8% retracement of 122.17 to 115.13) indicates that a stronger rebound is underway. Also, price actions from 122.17 is probably developing into sideway consolidation to rise from 108.99 only, instead of as the third leg of the large scale consolidation that started at 121.38. In such case, a rest of 122.17 high could then be seen. But still, firm break above this resistance is needed to confirm medium term rally from 108.99 has resumed. Otherwise, medium term outlook will be neutral at best.
On the downside, a firm break below 117.60 support is needed to confirm that rebound from 115.13 has completed. This will save the case that rebound from 115.13 is merely a correction of the fall from 122.17, which should have then completed. In such case, deeper decline should be seen to retest 115.13 low.
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Shing-Ip Tsui is the founder and CEO of www.ActionForex.com. ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.