Dollar Slips on Weak Payrolls

Daily Analysis - 05/10/2015

A Disappointing September Print and August Revision Pushes Down Dollar Across the Board

The US economy added 142,000 jobs against forecasts of 203,000 while the August payrolls report was revised lower to 136,000, confirming global growth concerns. The weak NFP print has pushed back expectations of a US rate hike with October off the table and forecasts of a December hike declining.

Gold Rallies

Friday's weak nonfarm payrolls report saw gold futures rally over 2.20% or about $25.26 points on Friday afternoon following the announcement. Gold futures which declined by over -3.50% during the week managed to recover most of the losses, closing the week at a -0.72% loss. The emerging technical pattern in gold futures indicates a possible move to the upside upon break above key resistance in the ascending triangle pattern. A close above the resistance sitting at 1168 and 1170 is required in order for gold to rally towards the psychological price level of 1200 and eventually to 1221. The longer term descending wedge pattern indicates an eventual upside to 1300 should prices take support above the 1221 resistance for support. Gold posted a new 52-week low of 1077.18 back in July and has since then remained choppy for the most part.

US GDP to be Impacted

Besides the payroll figure released on Friday, market saw the release of the monthly factory orders data which contracted -1.70% for the month. The decline in the previously released ISM manufacturing PMI combined with the fact that manufacturing jobs decreased on the whole last month has seen US GDP forecasts for the third quarter revised lower with expectations of a weaker print around 1.20% - 1.50%. This comes after the US experienced especially strong second quarter growth of 3.90%. Softer GDP data is also likely to have further implications on the Federal Reserve's plans for rate hikes as lower than anticipated GDP data could see the Fed hold off rate hikes during the fourth quarter of the year. EURUSD is currently shaping up to form an ascending triangle pattern, with resistance at 1.1455. A successful break above this level could see further gains in the near-term.

Eurozone Services PMI

The services PMI from Eurozone and its main economies will be released later today. The flash services PMI numbers released last week showed the services PMI at 54.0 and 53.9 for the composite PMI. Expectations are for the services and composite PMIs to have risen to 54.2 and 54.0 respectively. A match of estimates will confirm consistent growth on a quarterly basis, validating the third quarter Eurozone GDP estimates around 0.40% for the quarter. Consumption is likely to lead the way on account of lower fuel prices and higher household income. The Eurozone Sentix investor confidence is due for release today, with the median estimates pointing to a soft print of 12.2 compared to 13.6 last month. EURGBP closed Friday with a small bodied candlestick pattern near the top which could potentially signal a short-term decline in prices with upside resistance at 0.7432.

Quiet Monday Session Ahead

Economic data today is relatively quiet in comparison to the events scheduled later in the week. Leading off the week is the UK services PMI due for release this morning with expectations of an increase to 56.4. Services PMIs have posted three consecutive months of decline since July this year in what was considered to be a strong sector in the UK. A beat on the estimates will confirm all three PMI's rebounding in September which should help boost the British Pound in the near-term. The US ISM non-manufacturing PMI is also due later in the day with expectations of a soft print at 57.7, down from 59.0 last month. A weak print in the non-manufacturing ISM could keep the US Dollar under pressure. GBPUSD will need to close above 1.5215 in order for the Cable to correct higher towards key levels at 1.5380 and 1.5400.