As the monthly leviathan of NFP rolls into town once again, it is perhaps the weekly chart for the dollar index which is more pertinent, given the confluence of forces now massing against the USD, ranging from FED rhetoric, politics and factual economics, which are now all combining in the maelstrom which is engulfing the currency of first reserve.
For the FED Pollyanna speak is now discredited, with Janet Yellen increasingly seen as out of touch with reality and desperate to hold onto her job. From Trump Towers, the openly expressed view is for a weaker dollar and lower interest rates, a view generally supported by the economic data of the last few months.
Under normal circumstances, rising interest rates would suggest a currency set to strengthen on differentials and flows, yet these are far from normal times, with the playground politics of the White House playing out against a loss of confidence in the FED. And from a technical perspective, the current market direction is self evident on the weekly chart, with the 12,600 high of early 2017 now a dim and distant memory. Since then, every minor rally has been duly snuffed out, with the index now looking set to make it four straight weeks of losses as bearish sentiment accelerates further. More worrying, with the index now trading at 11,878, this is deep within the congestion zone created throughout 2015 and 2016, and as the index pushes lower still, the floor of further support is now fast approaching at 11,750 and if breached will add further sustained downwards pressure on the dollar.
Today’s NFP numbers are forecast to be 182,000 against a previous of 222,000, which reflects the seasonal aspect of jobs in the headline number. Far more relevant of course are such figures as wage inflation and weekly hours, which provide a more detailed and relevant picture of the economy as these are also the inflation numbers that are considered the determining factor in interest rate decisions. However, given the confluence of politics, rhetoric face saving and fantasy, today’s number is likely to have little impact on the longer term trend for the US dollar, with little evidence yet, either technical or fundamental, that the the current bearish trnd is likely to end any time soon.
Finally and perhaps reinforcing the fact we are far removed from anything that could bc considered the norm, commodity markets have failed to reflect the endemic weakness in the US dollar. Normal service will be resumed at some point, but not just yet!
By Anna Coulling