The United States released a second consecutive successful report on non-farm wages. The USD is the subject of a moderate offer following the news. This is consistent with a strengthening of correlations relating to data surprises with a large change in the USD. TD Securities economists expect this to hold over the coming weeks, as the Fed has stressed that the data is critical to informing the reduction in the near term.
Dollar bears may need to be strategically careful
“The payroll was + 943K in July, above the consensus of + 870K. The unemployment rate fell to 5.4% from 5.9%; the household survey employment measure increased by 1.043 million, after just 18,000 in June, and the participation rate rose 0.1 point. The average hourly wage was + 0.4% month on month), after + 0.4% in June (revised from 0.3%). The year-over-year change in hourly earnings fell from 3.7% to 4.0% (revised from 3.6%).
“We think it’s safe to expect data surprise and the dollar’s broad correlations to persist into early fall. To the extent that this remains the case, we would expect the US dollar to perform against currencies where more accommodating central banks exist. “
“The euro is a key target with 1.1780 followed by 1.1750 as the main support. Below 1.1704 is the last major pivot before the 1.16 support.”
“USD / JPY also appears vulnerable to an upward compression following the breach of trendline resistance established from the July highs.”