Synergy FX - US Payrolls and Greek Pandemonium
In observance of the United States Independence Day celebrations, the US Non-Farm Payroll report will be released on Thursday instead of Friday.
With recent comments from FED officials about the importance of wage growth and labour market slack, the headline job creation number could play second fiddle to the Average Hourly Earnings and the Unemployment Rate.
The preliminary forecasts suggest headline growth at 230k, with the unemployment rate falling to 5.4% with a .2% gain in average hourly earnings. Weekly jobless claims have been averaging around the 270k level which suggests headline jobs growth is well anchored above 200k. However, the direction and magnitude of the USD move will likely be driven by the Unemployment rate and wage growth.
Sunday's alleged referendum may limit FX liquidity
FX liquidity is likely to dry up shortly after the release as many desk dealers are expected to leave early to get a jump on the long weekend. Further, the ongoing chaos in Greece in front of Sunday's alleged referendum may also limit flows later in the day.
As such, Synergy FX believes that the risk to the USD may be somewhat asymmetrical; with the Greenback giving up some recent gains on a weaker report more so than it will extend higher on a better report.
With respect to Greece and the EU creditors, we don't believe the recent comments and contradictions materially advance the existential risk to the final outcome.
In other words, we believe that the recent price action in the EUR/USD shows that the common currency is poised to trade sharply lower over the medium-term whether Greece remains in the EMU or if they choose to leave.
A weaker payroll number could see the EUR/USD trade back into the 1.1160 area. If so, this would be a reasonable level for day traders to add to short positions for an initial target of 1.0955.