The US Dollar may be unusually vulnerable to even modest disappointment on Augusts’ nonfarm payrolls figure after rising to a 12-month high against the majors.

Talking Points:

  • US Dollar May Correct Lower if Payrolls Prove Anything Less Than Stellar
  • Dovish Commentary from FinMin English Sank NZ Dollar in Overnight Trade
  • See Economic Releases Directly on Your Charts with the DailyFX News App

Currency markets are likely to look past a quiet European economic calendar to focus on the much-anticipated release of Augusts’ US Employment data. The report is expected to show that the economy added 230,000 jobs, topping July’s 209,000 increase. US economic news-flow has dramatically outperformed relative to consensus forecasts over recent weeks, suggesting analysts are underestimating the vigor of the world’s largest economy and opening the door for an upside surprise.

With that in mind, leading survey data is a bit disconcerting, suggesting the pace of growth in the service sector – the largest employer in the US – slowed for the third consecutive period last month. Meanwhile, the markets have become heavily skewed on the long side of the US Dollar as prices test 12-month highs. That suggests the greenback may be asymmetrically responsive to a downside surprise versus the alternative, with even a meager downside surprise threatening to touch off profit-taking and fuel a sharp downward correction.

The New Zealand Dollar underperformed in overnight trade, falling as much as 0.3 percent on average against its leading counterparts. The move came against a backdrop of dovish rhetoric from Finance Minister Bill English, who said he expects the Kiwi to fall against its US namesake as pressure on interest rates in the island nation moderates while inflationary pressure proves weaker than expected. English added that weak dairy prices represent a “downside risk” for the economy.

Critical Levels
CCY Supp 3 Supp 2 Supp 1 Pivot Point Res 1 Res 2 Res 3
EURUSD 1.2538 1.2772 1.2858 1.3006 1.3092 1.3240 1.3474
GBPUSD 1.6104 1.6240 1.6285 1.6376 1.6421 1.6512 1.6648