NFP DISAPPOINTS, USD BULLS RESPOND TO QUICK PULLBACK TO BRING FRESH HIGHS

April Non-Farm Payrolls data was released out of the United States this morning, and the headline number came-in with disappointment as the +163k print was unable to match the expectation of +191k. On the bright side, the unemployment rate did drop to a fresh 17-year low, printing at 3.9% versus the expectation of 4% flat; but offsetting that positivity was Average Hourly Earnings coming-in at the same 2.6% as last month, and this was against an expectation for a rise to 2.7%. Given the focus on inflation as markets attempt to gauge whether the Fed is headed for a total of three or four hikes in 2018, and the Average Hourly Earnings portion of the this morning’s report may get a bit more attention as we move deeper into the month of May.

In response, the US Dollar put in an initial move of weakness that was quickly met with buyer support. Prices moved back to their pre-NFP levels, and after a few minutes of congestion, bulls punched up to a fresh 2018 high. The move has yet to show significant continuation potential, as buyer demand diminished when trading above the prior high of 92.82.

US DOLLAR VIA ‘DXY’ 15-MINUTE CHART: BUYER SUPPORT (RED) PUSHES UP TO FRESH 2018 HIGHS (BLUE)

Chart prepared by James Stanley

On a longer-term basis, the big question is whether this morning’s data supports the thesis of a stronger US Dollar. The Greenback has been jumping of recent, gaining as much as 4% from the mid-April lows. But – the move has been rather sharp with nary a pullback, giving rise to the idea that what we’ve been seeing can largely be attributed to short-cover after a really brutal prior year. While many can point to March US inflation figures coming in at one-year highs, driving expectations for a more hawkish Fed that may be able to put in a fourth rate hike in 2018, the fact of the matter is that not much has changed here.