US Dollar Forecast: Impact of Upcoming Jobs Report
The U.S. dollar and financial markets are bracing themselves for the release of February’s U.S. nonfarm payrolls figures by the U.S. Bureau of Labor Statistics. This highly anticipated report has the potential to ignite volatility and force investors to reassess the Federal Reserve’s monetary policy outlook. Traders should prepare for the possibility of wild price swings across key assets heading into the weekend.
Economists are projecting that U.S. employers added 200,000 workers to their ranks last month, following the momentum of 353,000 jobs created in January. The unemployment rate is expected to hold steady at 3.7%, highlighting the tightness of the labor market. However, recent employment data has consistently outperformed estimates, increasing the risk of yet another upside surprise.
The outcome of the jobs report could have significant implications for the timing of the Federal Reserve’s easing cycle. If hiring activity surpasses projections by a wide margin, investors may have to abandon hopes of central bank easing in the second quarter. This would expose the gap between Wall Street’s desire for rate cuts and the Fed’s pledge to remove restrictive policy only after gaining greater confidence in inflation moving sustainably toward the 2.0% target.
In this scenario, interest rate expectations are likely to shift in a more hawkish direction, with traders pushing out the timing of the first FOMC rate cut to the second half of the year and scaling back future easing. This could lead to higher U.S. Treasury yields in the near term and allow the U.S. dollar to recover some of its recent losses.
On the other hand, if the NFP report falls short of expectations, particularly with a significant miss in job creation, it could strengthen the market’s belief that Fed cuts are imminent in June or even May. This would weigh heavily on bond yields and accelerate the U.S. dollar’s downturn. A headline NFP figure around or below 100,000 could trigger this response.
Technical Outlook for Major Currency Pairs
EUR/USD Forecast:
EUR/USD experienced a rally on Thursday, breaking through major barriers and reaching its highest level since mid-January. The pair is now approaching important resistance at 1.0950, and a breakout could fuel a move toward 1.1020. On the downside, the psychological level of 1.0900 and confluence support at 1.0850 will be key levels to watch.
USD/JPY Forecast:
USD/JPY extended its losses on Thursday, approaching cluster support between 147.85 and 147.50. Bulls will need to defend this area strongly, as a failure to do so could lead to a drop towards 146.60. On the upside, resistance levels can be found at 148.90 and 149.70, with further gains potentially targeting horizontal resistance at 150.90.
GBP/USD Forecast:
GBP/USD saw a significant surge on Thursday after breaking trendline resistance around 1.2715. If this breakout is sustained, bulls could soon challenge the next major technical ceiling near 1.2830, with further progress potentially pushing towards 1.3000. On the downside, initial support rests at 1.2715, followed by 1.2675 and trendline support at 1.2640.
Conclusion
The upcoming U.S. jobs report has the potential to create significant volatility in the financial markets and impact the U.S. dollar’s outlook. Depending on the outcome, it could either delay expectations of rate cuts or strengthen the belief that cuts are imminent. Traders should closely monitor the report’s release and be prepared for wild price swings across major currency pairs.