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Greenback strengthens ahead of payrolls

US dollar strength remained the key theme in FX markets heading into the non-farm payrolls data.

USD
Source: Bloomberg

Data continued to tick along with unemployment claims falling more than expected and bringing the four-week average down to 279,000. From today’s non-farm payrolls data, the market is expecting 229,000 jobs added and for the unemployment rate to remain steady at 5.9%. Average hourly earnings are expected to show a rise of 0.2%.

Following the data, Fed chair Janet Yellen also speaks as she participates in a panel discussion on policy since the onset of the financial crisis. Due to the fact the market is positioned for a strong jobs reading today, the USD is at risk of some profit taking.

Look to buy dips in USD/JPY

USD/JPY is one pair that has been on a tear recently and continues to venture into territory that’s been unchartered for some time. The pair hit a high of ¥115.52 and will remain in focus heading into the payrolls data. While the pair has since pulled back a touch, momentum clearly remains to the upside and traders are more likely to be looking at buying the dips. This leaves the pair vulnerable to a near term pullback as traders are likely to take profits on the back of the payrolls release. Having said that though, I would not encourage traders to consider shorts, rather buying dips below ¥114.00.

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