EUR/USD has the 1.1975 mark in its sights on soft NFP expectations – TDS

Ever since Powell's Jackson Hole remarks, the FX market has turned its focus to the payrolls report as the next major decision point for the USD. TD Securities’ below-consensus forecast should be meaningful for the USD and has economists at the bank biased to further softening.

EUR/USD bias is to the topside

“A 400K rise in payrolls would be strong by pre-COVID standards, but it would be well below the 900K+ readings in June and July. We don't think a 400K reading would be weak enough for Fed officials to back away from their ‘this year’ tapering signal, but it would probably increase the probability of a formal announcement coming at the December rather than the November meeting.”

“Our expectation for a below-consensus print is meaningful in our view, particularly since the USD continues to exhibit sensitivity to domestic data surprises — both in the absolute and relative sense. As such, we are biased for the USD to continue to soften.”

“We think downside has its limitations, with the post-June Fed range lows in the BBDXY marking formidable support. Unless the Fed has an about-face on taper, dips in the USD are likely to be short-lived.”

“We think EUR/USD has scope to rally marginally further following another breach of 1.1840 downtrend resistance; 1.1909 and 1.1975 will be the primary attractors to the topside.”