If another resilient US jobs report is announced, short EUR/USD?
Global stocks sell-off started from a month ago when US released its January jobs report. Traders will be watching February data tonight closely, especially on wage growth. Any surprises to the upside may impress the Fed and cause them to tighten monetary condition more aggressively this year.
- Traders need to watch the unemployment rate closely tonight since wage growth accelerated in January. Bear in mind, if unemployment rate falls from 4.1% level where it has held since October, it would be the first time jobless rate is at or below 4% since December 2000.
- Average hourly earnings, the primary measure of wage growth, will be the key focus to watch for the jobs report tonight. Average hourly earnings has advanced 2.9% y/y in January, which was the highest since 2009. If wage growth were to hold at this level or even higher, we could see dollar index being supported at the 90 level for the next five days.
- If the data were to surprise to the upside, EUR/USD could be deemed a “clearer play” than USD/JPY, as dollar’s upside could be offset by a stronger yen due to potential risk off. On the other hand, if the data were to surprise to the downside, EUR/USD could rise.
- Just to note, most of the major stocks that are rising today are mainly due to Trump-Kim possible unprecedented summit by May, as well as US tariffs which excludes Mexico, Canada and possibility other allies in future.
Fullerton Markets Research Team
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