(February 3, 2017) It is going to be an important day today in the markets, a day that might determine the short term trend for the US dollar. The dollar has been on the backfoot over the past couple of weeks due to comments from Trump and his team who have basically challenged the major economies of the world to a trade and currency war. This is not something that the markets are used to as for the last 8 years, Obama had kept himself away from dealing with currencies and left it all to the Fed. So, we believe that it will take some time for the markets to get used to the ways of Trump and also accept the fact that he is here to stay and that it better get used to him being around for the next 4 years. If the markets can get Trump out of their minds, then it would be easier for it to focus on the other economic and fiscal issues that are likely to really affect the dollar value.
One of those important parameters would be released today as the market looks ahead to the NFP report later on, along with the wage earnings. A strong employment report would help to increase the chances of a quicker rate hike from the Fed and also help to bring back the focus on the Fed as far as the dollar value is concerned. This is probably the last chance for the dollar to make any serious kind of comeback in the short term and it is to be noted that the market has positioned itself in such a manner that it will be Judgement day today. We see that the EURUSD is near the resistance region while the USDCAD and USDJPY are near support and they look well placed to either breakout through their support/resistance or fade/bounce depending on how the employment report comes in.
This morning, we had the manufacturing PMI data come in from China which showed a slight weakening as the data came in at 51 against the expected value of 51.8. We have the services PMI data from the UK that will be released during the London session but for all practical purposes, the NFP will be the key today.