MICHAEL HEWSON, CMC MARKETS. Weekly jobless claims have come in above 300k for three of the last four weeks in a sign that job losses in the manufacturing sector could well be starting to bite as US oil producers cut back. This week’s ADP also pointed to fewer jobs being added on a monthly basis, despite positive revisions for 2014.
In this context, today’s February employment report is likely to be important in the context of the direction of travel of how many jobs are being added on a month on month basis. Expectations are for 235k new jobs for February, down slightly from the 257k new jobs in January and for the unemployment rate to fall to 5.6%, but it is likely to be the average hourly earnings data that is likely to be front and centre on most people’s radars as it was last month.
A sharp jump in the year on year number to 2.2% in January caused a great deal of bullishness, with respect to rising wages, but a large part of the rise was as a result of double digit minimum wage increases filtering through into the numbers from up to 23 US states. Expectations are for the year on year number to slip back to 2.1%, with a month on month rise of 0.2%.
EURUSD – yesterday’s move below 1.1000 brings the euro closer towards the 1.0800 level in the short term, after the failure to move beyond the resistance at the 1.1250 area earlier this week. Only a move back through 1.1270 re-targets the 1.1450 area and last week’s high.
GBPUSD – this week’s move through the 1.5330 area opens up the potential for a move towards 1.5000, with an interim target at the 1.5120 area, as the key day reversal we identified last week starts to unwind. To stabilise this move lower we need to get back above the 1.5350 area.
EURGBP – yesterday’s move down to 0.7220 brings puts in another new low as we continue to push closer to the 0.7000 level. We need to see a move back through the 0.7300 level to undermine the downward momentum, otherwise we could well be set for a further decline towards the 0.7000 level.
USDJPY – we continue to grind higher but we still need to overcome the 120.60 to suggest a retest of the 121.85 highs from last year. If we can’t sustain a move back through 119.80 we could well head back towards 118.60.
The US trade deficit for January is expected to shrink to -$41.2bn from -$46.6bn.
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