The non-farm payroll came with an actual result that was way behind the expectation. As a result, the US Dollar became weaker against other currencies immediately after releasing the news. Can Weaker NFP Push US Dollar Down? Get more insights for the new trading week with AtoZ Markets' Forex Weekly Fundamental Forecast.
May 09, 2021, | AtoZ Markets– The US Dollar became weaker against major currencies as soon as the Non-Farm Payroll missed the expectation. Moreover, unemployment came at 6.1% from 6.0% indicating an increase in unemployment. Therefore, overall we may see a US Dollars weakness this week due to a weaker NFP.
Forex Weekly Fundamental Outlook- Weaker NFP
Due to the weaker NFP, we may see some decent movement in most of the major currency pairs. Let's have a look at the forex Weekly Fundamental Outlook with the GBPUSD:
The UK GDP showed a 2.2% contraction in January with a better than expected result. Therefore, the slowdown in Q1 may show a reduction of growth not more than 4%. Besides, other expectations are positive for the UK economy. In March, businesses started inventory preparation for the economic reopening in Q2. Moreover, this week’s preliminary number may come with 1.7% extraction.
On the other hand, the brightest spot of the UK economy was the manufacturing sector that came stronger from limiting lockdowns. Since the first lockdown ended, this sector started to grow after a decline for a year at 4.6% in March 2020 and a 24.4% decline in April 2020.
After that, the positive readings came in January with tighter restrictions and lockdown and the slowdown in the economy. Therefore, industrial production fall by 2.3%, and the production output showed a -1.5% contraction. Since then, the economy started to grow with a 1.3% rebound in February. As a result, analysts predict that the March number will come with a 1.5% rise in manufacturing products with a 1.2% rise in industrial production.
On the other hand, the US Dollar is struggling to get momentum with a weaker NFP. In that case, we may expect a corrective momentum this week towards the GBP.
- Possible GBPUSD Trend: Bullish
- GBPUSD Target Level:141.00
- GBPUSD Invalidation Level: 138.33
According to the latest monetary policy of the Mexico Central Bank, the interest rate has a higher possibility to increase in coming quarters. After the monetary policy decision, the Mexican Peso became volatile while the ination may move higher over the next few months. In addition, in other emerging markets, central banks started to raise interest rates that may provide extra incentive to the Central Bank of Mexico to lift rates.
In the next monetary policy meeting, the Central Bank of Mexico may provide additional insight and the possible path of the monetary policy. Specifically. The composition votes related to interest rates may show the presence of dissenters from keeping rates on hold. The decision to hold rates was steady at 4.00%, but the bi-weekly ination was above 6%. As a result, there is a possibility of rate hikes soon.
As a result, we expect bearish pressure in the USDMXN as the US economy is struggling to get over the weaker NFP report. Moreover, this weekly may remain mute with the absence of high-impact news from the US Dollar.
- Possible USDMXN Trend: Bearish
- USDMXN Target Level: 19.88
- USDMXN Invalidation Level: 19.60
The USDJPY moved lower almost half percent on Friday with the lower than expected US labor market data from teh USA.
Investors and market participants were shocked as the NFP reported a short of expectations, posting only 266K new jobs in April. The consensus was millions of new jobs, and the failure to achieve it pushed the USDJPY price down with an impulsive bearish pressure.
According to some prominent analysts, it is shocking to see job growth at only 266K with an unemployment rate of 6.1% and earnings growth of 0.7%. The fragile numbers pushed the US Yields down with a 1.5% down before retracing the movement.
Moreover, there is no indication of other statistical data that shows the US economy to recover. Besides, Purchasing Managers Index is manufacturing and services come down in April from the pandemic while the factory sentiment remained at an all-time high.
However, the dip in the manufacturing outlook shows that there is no frustration in supply. New orders in both sectors remain strong as it was six months ago.
On the other hand, the Japanese economy is neglecting this week with no important data release. As a result, the Dollar weakness may continue with a corrective speed.
- Possible USDJPY Trend: Bearish
- USDJPY Target Level: 108.54
- USDJPY Invalidation Level: 107.50
BT Group [BT.A]
Since 2020, BT Group is competing for demands on the tough market in mobile margins and broadband markets. Its enterprise and global division are facing a cope up with massive changes in the global business environments.
The positive side of the Openreach division is that the high-speed broadband UK need may keep under the BT umbrella. The management guided with the full-year revenue at £7.3bn to £7.5bn with the dividend of 7.7p a share in the next fiscal year.
On the other hand, teh Openreach Fiber to premises (FTTP) network reached 4.1m premises with the track to 4.5m by March. Now BT Networks are talking about BT sports that may become luxurious into this network structure.
In addition to that, the disposal of assets with a better spend may support various networks that may make significant progress to the company’s revenue.
- Possible BT Group Trend: Bullish
- BT Group Target Level: 157.00
- BT Group Invalidation Level: 172.00
Rolls Royce [RR]
Rolls Royce is fighting with some serious issue as soon as the pandemic came from China a year ago. Its full-year number of 2019 posted an operating loss of £2.9bn and £850m in 2019. Moreover, the operating loss of £2.1bn in 2020 was almost the same as in 2018. The operating loss includes a finance charge of £1.7bn as an FX hedge.
In 2021, the free cash flow estimation is at £2bn, while wide-body engine flying hours may bring a positive free cash flow in the second half of this year. Based on this report, the positive free cash flow may come at £750m in 2022, considering the engine flying hours of 80% of 2019 levels.
Rolls Royce CEO said that the £9bn extra liquidity raised is enough for the next two years to operate the business. The sales of Gergen engines are on hold for the Norwegian government, while the talks with Spanish operation ITP are concerned about the job losses.
- Possible Rolls Royce Trend: Bullish
- Rolls Royce Target Level: 120.42
- Rolls Royce Invalidation Level: 99.66
The COVID-19 pandemic came with a huge chunk in Disney’s annual revenue due to parks, and travel business closes.
Despite the business and pars closure, Disney stock showed a decent movement by moving to the record high in March. Later on, the streaming service in Disney Plus helped to surprise the profit in Q1.
Revenue came down to $16.2 billion from the profit of $17m. The close of parks and other businesses took $2.6bn hits, while the Disney Plus helped to cushion some profit.
As the summer is coming, investors are waiting to reopen Disney theme parks. As a result, there is a possibility of a rebound in the Disney quarterly stocks in the coming sessions.
- Possible Disney Trend: Bullish 184.84
- Disney Target Level: 194.88
- Disney Invalidation Level: 181.00
According to the CoinMarketCap, there was a strong selloff in Bitcoin mining due to the power cut in China’s Xinjiang region.
According to a prominent analyst, people may sell Bitcoin on the news of power outrage, but it will not affect the mining network. On the other hand, some crypto enthusiasts believe that there will be an effect on the Hash rate due to the power cut.
The Hash rate determines the volatility index to measure the processing capacity of the overall Bitcoin network. Moreover, it determines how much power the Bitcoin network needs to produce new Bitcoins.
However, the effect of a power cut may have less impact on the Bitcoin price. The BTC/USD is going up as soon as it failed to sustain below teh $50,000 level.
- Possible Bitcoin Trend: Bullish
- Bitcoin Target Level: $61,329.67
- Bitcoin Invalidation Level: $53,000.00
Ether is the Cryptocurrency from the Ethereum Blockchain. It hit an all-time high at $3456.57 as the bullish rally extended over 350% this year.
The cryptocurrency interest has increased over the past years, where Bitcoin reached a record high. The main reason behind the movement was institutions’ involvement, like Tesla buying BTC. Bitcoin is known as digital gold, while ETH is silver. Both of these instruments work well as an inflationary hedge.
Moreover, the key feature of Ethereum is the smart contracts that can automatically generate codes. Nowadays, the growing excitements in teh decentralized finance with blockchain-based services may bypass bands and brokerages. As a result, the rising interest in institutional investment is the main reason behind the bullish pressure in ETH/USD that may continue this week.
- Possible Ethereum Trend: Bullish
- Ethereum Target Level: $4500
- Ethereum Invalidation Level: $3000
Overall, investors may see some decent movement this week with the weaker NFP. On the other hand, the global market is still facing some pressure from the 3rd wave of COVID-19, especially in the Asian continent.
Can Weaker NFP Push US Dollar Down? Let us know in the comments section below!