June 7th 2021
I didn’t expect all that much from the Dollar last Friday, after the move up on Thursday following the near 1M ADP employment number. That seemed to spoil Friday’s big show. It was a bit like going on stage second when Jimi Hendrix is your support act.
However, what I didn’t expect was for the NFP to fall short of the forecast number for the second time. What’s wrong with US employment? Nothing according to the most recent Jolts numbers.
I think the problem may be the large number of people still receiving welfare checks every month. Being well paid to stay home, is hardly an incentive to go to work. But the payouts are coming to an end in many of the US States in the next few months. So possibly no more NFP disappoints.
Even with the negative initial reaction to the data, the US Dollar has recovered some of its poise, the GBPUSD looks a little vulnerable today.
I think the market has one eye on Thursday’s US CPI. It also might be partly due to UK Health Minister Matt Hancock, saying he was open to pushing back Pandemic freedom day by 2 weeks in light of the increase of new Covid cases.
The support for the GBPUSD remains at 1.4090 and then again at 1.4060, However, I would not rule out a bigger drop to 1.4000.
As the Pound has failed again at 1.4200 I am starting to look for a deeper correction towards 1.4000/1.3980.
1.4200 is still strong resistance and even if we do break it, progress will soon run into multi-year highs at 1.4240/60 limiting the upside in the short term at least.
I do like buying the GBP in dips, but I sense a change may be coming in the fortunes for the Dollar, with robust inflation and improving employment numbers looking likely. Buying GBP against the EUR or JPY may be a better option going forward.