The US Dollar may decline on fading Fed rate hike bets while the Yen gains amid risk aversion following a disappointing US Employment report.

Talking Points:

  • US Dollar May Fall as Japanese Yen Gains on Soft US Employment Report

  • Aussie, NZ Dollars Rise as RBA and RBNZ Rate Cut Speculation Moderates

  • See Economic Releases Directly on Your Charts with the DailyFX News App

A relatively quiet European economic calendar is likely to see investors focused on January’s US Employment report. Expectations call for a 230,000 increase in nonfarm payrolls, marking a slight deceleration in job creation compared with the 252,000 added in the prior month.

Realized US data has increasingly softened relative to expected outcomes recently, opening the door for downside surprises. Such results may weigh on the US Dollar as traders push back Fed rate hike expectations. It may likewise drive risk aversion amid worries the about the inability of US growth to offset malaise in Europe and Asia, triggering an unwinding of carry trades and boosting the Japanese Yen.

The New Zealand Dollar outperformed in overnight trade against a backdrop of easing RBNZ rate cut expectations. Bets on imminent policy easing have been moderating for the past two days after central bank Governor Graeme Wheeler hinted at a prolonged period of standstill ahead.

The Australian Dollar likewise pushed higher on the back of the quarterly RBA Monetary Policy Statement. While Glenn Stevens and company downgraded their outlook for economic growth, thereby justifying the interest rate cut delivered earlier in the week, they likewise projected inflation in the 2-3 percent range for the year. That puts price growth in line with the RBA’s target, arguing against an aggressive easing cycle in the near term.

Critical Levels
CCY Supp 3 Supp 2 Supp 1 Pivot Point Res 1 Res 2 Res 3
EURUSD 1.1037 1.1232 1.1354 1.1427 1.1549 1.1622 1.1817
GBPUSD 1.4926 1.5103 1.5216 1.5280 1.5393 1.5457 1.5634