EUR/USD, AUD/USD, GBP/USD And USD/JPY Daily Outlook

EUR/USD

The Euro has moved lower on the back of dollar strength as the market awaits in anticipation of bigger news in the form of NFP that is scheduled to be released later in the day. The euro has moved through some of the major supports and thi is likely to put the euro bulls into a lot of pressure as we head into the release of the news. The dollar has been strengthened on the back of easing of fears about a trade war but it has to be noted that late in the day, the Trump government is mulling tripling the tariffs that have already been imposed on China. This shows that they are not going to back down on their plan and this brings into the fore the question of fear and uncertainty in the markets once again. We do not know in which direction and how the problem is going to escalate in the coming days but the traders need to be aware.  The euro has also moved into the backfoot as the data from the Eurozone over the last few weeks has not shown the strength that we were seeing towards the end of last year. The incoming data has shown signs of weakness and this has led to the belief that we may also be looking at a situation where the ECB would have to delay some of their major decisions which would in turn mean that the tapering of the QE and its end could be delayed. Looking ahead to the rest of the day, it is going to be a quiet early half of the day with a lot of volatility likely to come up later in the day when the NFP data along with the average earnings data getting released during the US session.

GBP/USD

The British pound has broken down during the session on Thursday, slicing through the 1.40 level underneath. That’s an area that has been important in both directions, so it doesn’t surprise me that we have stalled a bit after breaking through it. A break above the 1.40 level should eventually send this market towards the 1.41 handle, and of course we have the jobs number coming out today which will be extraordinarily influential as to where we go next. The US dollar of course has a lot of sensitivity to the jobs figures, and I think that if we get a “risk on” move, it’s likely that we could rally from here. I anticipate a lot of volatility, so quite frankly it might be easier to trade the GBP/USD pair on the daily chart, letting the Friday session calm down and close before putting money to work.

If we do break down below the 1.39 handle, the market should break down to the 1.38 level underneath. Longer-term though, I do believe that the British pound will continue to attract a lot of money, and therefore it’s something you should be paying attention to. I think that ultimately, we will go looking towards the 1.43 level above, but a bit of stability is probably needed before we can make that trade. Beyond that, we could even go as high as the 1.45 level.

AUD/USD

The Australian and New Zealand Dollars are trading lower early Friday, following through to the downside after the previous session’s dramatic reversal to the downside. At 0625 GMT, the AUD/USD is trading .7669, down 0.0016 or -0.20% and the NZD/USD is at .7253, down 0.0017 or -0.24%. The current downside pressure is being fueled by fears of an escalation of a trade war between the United States and China. This came to the forefront late Thursday after U.S. President Trump said he had instructed U.S. trade officials to consider $100 billion in additional tariffs on China. President Trump said in a statement that further tariffs were being considered “in light of China’s unfair retaliation” against earlier U.S. trade actions that have triggered volatile responses in the global financial markets. The current price action also suggests investors may be taking the usual precautionary position adjustments ahead of the U.S. Non-Farm Payrolls report. The Non-Farm Payrolls report due out at 1230 GMT is important because a substantial headline number, and wage growth could drive the U.S. Federal Reserve to act more quickly in raising interest rates. This would be bullish for the U.S. Dollar. The NFP report is expected to show the U.S. economy added 188K new jobs in March. This is substantially lower than the previously reported 313K. Earlier in the week, ADP reported the private sector added 241K jobs last month so there may be some volatility in the NFP report number. Average Hourly Earnings are expected to jump 0.3% versus the previously reported 0.1%. This number is important to the Fed because it indicates inflation. The higher the percentage change, the greater the chances the Fed will stick with its aggressive strategy to raise rates at least 2 more times this year. The deck appears to be stacked against the Aussie and the Kiwi so we’re expecting to see lower prices today. An escalation of tensions between the U.S. and China will be the factor keeping a lid on any rally. Traders will be paying particular attention to the price action in the U.S. equity markets. The AUD/USD and NZD/USD can recover from their earlier losses if the U.S. equity markets mount a dramatic turnaround combined with a weaker than expected NFP report. Otherwise, we’re looking at a limited rally or a steep sell-off if stocks tumble and the NFP numbers, especially Average Hourly Earnings come in better than expected.

USD/JPY

The Dollar/Yen is trading lower early Friday, but coming back to nearly unchanged after an earlier setback drove the Forex pair to 106.986. The move likely indicates that today’s session will be volatile and may feature a two-sided trade. At 0509 GMT, the USD/JPY is trading 107.337, down 0.039 or -0.04%. The current price action suggests investors may be taking the usual precautionary position adjustments ahead of the U.S. Non-Farm Payrolls report, but also keeping an eye on the developing trade war between the United States and China. The Non-Farm Payrolls report due out at 1230 GMT is important because a substantial headline number, and wage growth could drive the U.S. Federal Reserve to act more quickly in raising interest rates. The NFP report is expected to show the U.S. economy added 188K new jobs in March. This is substantially lower than the previously reported 313K. Earlier in the week, ADP reported the private sector added 241K jobs last month so there may be some volatility in the NFP report number. Average Hourly Earnings are expected to jump 0.3% versus the previously reported 0.1%. This number is important to the Fed because it indicates inflation. The higher the percentage change, the greater the chances the Fed will stick with its aggressive strategy to raise rates at least 2 more times this year. The escalating trade war between the U.S. and China was at the forefront early Friday after U.S. President Donald Trump said he had instructed U.S. trade officials to consider $100 billion in additional tariffs on China. Trump said in a statement on Thursday that further tariffs were being considered “in light of China’s unfair retaliation” against earlier U.S. trade actions that have triggered volatile responses in the global financial markets. After Trump’s latest announcement, the Japanese Yen rallied against the U.S. Dollar as investors sought shelter in the safe haven currency amid weakness in the global equity markets. The direction of the USD/JPY today will be determined by whether investors decide to focus on the trade war or the non-farm payroll data. In my opinion, the NFP will have a short-term impact on the Dollar/Yen with the direction of the Forex pair largely determined by investor demand of risky assets.

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