Saturday , June 19 2021
Home / BK Asset Management / FX Breakouts or Fake outs? It Rests on NFPs

FX Breakouts or Fake outs? It Rests on NFPs

Summary:
FX Breakouts or Fake outs? It All Rests on NFPs Daily FX Market Roundup 06.02.2021 By Kathy Lien, Managing Director of FX Strategy for BK Asset Management This a big week for currencies but so far, we’ve seen nothing but consolidation. In today’s trade, the greenback strengthened against the New Zealand dollar and Swiss Franc, weakened versus sterling and the Canadian dollar and was unchanged against euro and the Japanese Yen. The Federal Reserve’s Beige Book report confirmed what investors already knew – which is that the economy grew at a faster pace in April and May. There was little response to this report because the main focus is non-farm payrolls on Friday. The economy is improving but job growth slowed significantly in April. If hiring fails to pick up in May, currencies

Topics:
Kathy Lien considers the following as important: , , , , , , , , ,

This could be interesting, too:

Kathy Lien writes USD/JPY Pulls Back but Dollar Bulls in Control

Kathy Lien writes Are the Dollar’s Post FOMC Gains Sustainable?

Jeffrey P. Snider writes Copper Corroding PPI

Kathy Lien writes FOMC Preview – Taper Talk and Impact on Dollar

FX Breakouts or Fake outs? It All Rests on NFPs

Daily FX Market Roundup 06.02.2021

By Kathy Lien, Managing Director of FX Strategy for BK Asset Management

This a big week for currencies but so far, we’ve seen nothing but consolidation. In today’s trade, the greenback strengthened against the New Zealand dollar and Swiss Franc, weakened versus sterling and the Canadian dollar and was unchanged against euro and the Japanese Yen.

The Federal Reserve’s Beige Book report confirmed what investors already knew – which is that the economy grew at a faster pace in April and May. There was little response to this report because the main focus is non-farm payrolls on Friday. The economy is improving but job growth slowed significantly in April. If hiring fails to pick up in May, currencies and equities will be in trouble.

The hesitation in stocks is a sign of overall investor concern. U.S. equities ended the day unchanged extending a multiday consolidation that could mark a top. For that to happen, the jobs report would need to be ugly. Earlier this week we learned that manufacturing activity accelerated but the dollar fell because manufacturing job growth expanded at a slower pace. Tomorrow, the ISM non-manufacturing report will be released. If the service sector fails to report a meaningful pickup in jobs, traders could sell dollars in fear of weak NFPs. If ISM is good, we could see renewed demand for dollars as traders position for a strong rebound in jobs on Friday.

The US jobs report is one of many important releases this month that could set the stage for big FX moves. Updated economic projections are scheduled for release from the Federal Reserve and the European Central Bank. Upgrades are expected for inflation and growth forecasts but what investors are really watching for are hints of taper. The Bank of England, Bank of Canada and the Reserve Bank of New Zealand have made their first moves either in the form of fewer asset purchases or projections for earlier rate rise. The U.S. economy is expanding just as if not more quickly than the U.K. and Canada but they’ve been reluctant to alter their forward guidance.

The Reserve Bank of Australia is in a similar position. The economy is improving but the RBA maintained their dovish bias because of mixed data. First quarter GDP growth was stronger than expected but the contraction in retail sales was deeper. Interestingly enough, while the Reserve Bank of New Zealand is less dovish than the RBA the New Zealand dollar was the worst performing currency. Lower dairy, import and export prices contributed to the move. The Canadian dollar was the best performer thanks to a smaller decline in building permits and fresh 2.5 year highs in oil. Weaker German retail sales prevented EUR/USD from trading higher but strong housing numbers lifted GBP/USD. Looking ahead, revisions to Eurozone and UK PMIs are due for release tomorrow.

Kathy Lien
Kathy Lien is an Internationally Published Author and Managing Director of BK Asset Management. Her trading books include the following: 1) For beginners, “The Little Book of Currency Trading (2010, Wiley).” 2) THIRD edition of the highly acclaimed, internationally published “Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2015, Wiley).” 3) Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley) 4) High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia)

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.