Forex Today: Can Dollar’s momentum continue in the week of US employment data?

More central bank decisions await in the coming week, with live meetings at the Reserve Bank of Australia and the Bank of England. US data will remain in the spotlight with key employment data, including Nonfarm Payrolls. Canada and New Zealand will also release job market data. Eurostat will release inflation and growth data.

Here is what you need to know for next week:

After the FOMC meeting, the focus in the US turns to jobs data. On Tuesday, we will have the JOLTS Job Openings report; on Wednesday, ADP Private Employment; on Thursday, the weekly Jobless Claims and the Unit Labor Cost; and on Friday, the highlight of the week with Nonfarm Payrolls. The economy is expected to have added 180,000 jobs in July, and the Unemployment Rate to have stayed at 3.6%. Also relevant will be the ISM Manufacturing PMI on Tuesday and the ISM Service PMI on Thursday.

The US Dollar rose during the week and was among the top performers, supported by US economic data. For the rally to continue, the Greenback needs another round of positive numbers. The DXY notched its second weekly gain after Thursday’s rally following US GDP data and closed above 101.50. Technically, it is not out of the woods yet, but it continues to recover from one-year lows.

US Treasury yields ended the week higher, supporting the US Dollar. The 10-year reached levels above 4.0% but then pulled back, while the 2-year settled around 4.9%. Eurozone bond yields also rose but at a more moderate pace.

EUR/USD dropped for the second week in a row, retreating further from one-year highs. It bottomed at 1.0940 and then bounced back above 1.1000. The main trend is still up, but momentum for the Euro is fading. Germany will report Retail Sales on Monday and Unemployment Rate on Tuesday. The preliminary July Eurozone Consumer Price Index is due on Monday, with a slowdown in the annual rate from 5.5% to 5.2% expected. On Thursday, Eurostat will release the EZ Producer Price Index (PPI), and on Friday, Retail Sales.

GBP/USD finished the week flat, hovering around 1.2850/60 after staging a limited correction. An important event of the week will be the Bank of England Monetary Policy Committee meeting. The central bank is expected to announce a rate hike on Thursday. The debate is whether it will be 25 or 50 basis points. While inflation and wage growth suggest that a 50 bps hike could be the decision, signs of a slowing labor market and the economic outlook favor a smaller hike.

Following a volatile Friday, USD/JPY finished the week modestly lower, near 141.00 and far from the bottom hit on Friday after the Bank of Japan’s surprise move. The market will look for clues about the next move and how close the central bank is to significantly changing its monetary policy stance. Any signs toward normalization could boost the Japanese Yen.

USD/CHF rose for the second week in a row, extending the recovery from multi-year lows and finishing slightly below 0.8700. Switzerland will release the July Consumer Price Index on Thursday, with a decline in the annual rate expected from 1.7% to 1.5%.

AUD/USD failed to hold above 0.6800 and remained around 0.6600. The pair continues to move sideways. The Reserve Bank of Australia (RBA) will have its monetary policy meeting on Tuesday, with a 25 basis point rate hike expected. 

NZD/USD also moves without a clear direction after being unable to break above 0.6400. It approached the 0.6100 support area. Early on Wednesday, New Zealand will release the Q2 employment report, including the Unemployment Rate and the Labor Cost Index.

USD/CAD rose marginally but remains capped by 1.3250. The pair is still biased to the downside. Canada will release the employment report on Friday after showing an impressive 59,900 positive employment change in June.

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