The battered dollar weakened against its major peers this week, as investors closely evaluated the fundamental factors that are weighing heavily on the currency.
Friday’s key event risk will be the U.S. jobs report for January, which should offer fresh insight into the health of the U.S. labor market. With the Federal Reserve expressing optimism over inflation rising this year and a brighter outlook for the economy, today’s NFP report will be in sharp focus. Markets expect the U.S. economy to have gained 180k jobs in January, with average earnings up by 0.3%, while the unemployment rate is expected to remain unchanged at 4.1%.
While every detail of the US jobs report is critical, there will be a strong focus on wage growth. Any signs of wage growth accelerating could stimulate expectations of rising inflation, ultimately lifting the prospects for further US interest rate increases this year. With the dollar clearly in need of a lifeline, it will be interesting to see if January’s U.S. jobs report comes to the rescue. A scenario where the headline jobs number and wage growth both dish out upside surprises may offer the Dollar some support.
Focusing on the technical picture, the Dollar Index remains firmly bearish on the daily charts. Technical lagging indicators, such as the 50-simple moving average and MACD both go in line with the bearish bias. Repeated weakness below 89.00 may invite a further decline towards 88.50 and 88.00, respectively. Alternatively, a move back above 89.35 could spark an incline back to 89.60 and 90.00.
Commodity spotlight: Gold
Gold prices appreciated for the second straight session on Thursday, as a softening U.S. dollar stimulated investor appetite for the yellow metal.
Prices remain nearly unchanged during early trading on Friday, ahead of the heavily anticipated U.S. jobs report scheduled for release this afternoon. Gold bulls could receive fresh inspiration to elevate prices higher towards $1,360 per ounce if the NFP report disappoints. Alternatively, a solid U.S. jobs report could trigger a technical correction which sends the metal back to $1,340. From a technical standpoint, we remain bullish on Gold on the daily charts, as there have been consistently higher highs and higher lows. The new higher low around $1,333 may create a foundation for gold to test $1,360 and higher.
Bitcoin struggles to fight back
It has certainly been a horribly bearish trading week for Bitcoin, thanks to heightened fears of a regulatory crackdown.
The growing confusion revolving around the Indian government’s view on cryptocurrencies sparked uncertainty on Thursday, consequently exposing Bitcoin to downside risks. With U.S. regulators closely scrutinizing one of the world’s largest digital exchanges and Facebook Inc banning adverts that promote cryptocurrencies, Bitcoin is in trouble. Price action suggests that bears are clearly in control, with further losses on the cards as jitters over regulation erode investor appetite further. From a technical standpoint, Bitcoin is firmly bearish on the daily charts. The breakdown below $9,000 may encourage a further decline towards $8,400 and $8,000, respectively.