Step forward or turn around? Payrolls will clarify

Global markets traded with little change on Friday morning, expecting that the US data may help to determine the further trend. Closer to the panic sales late last week, this week was replaced by stormy purchases on the enthusiasm around the coronavirus, as well as support from the Chinese Central Bank.

American indices updated record levels on Thursday and froze in some indecision. The European EuroStoxx50 has been increasing since the beginning of the week at a record pace for more than three years, returning to historical highs at 3800. Also, Dow Jones, S&P500, as well as the most popular FX pairs EURUSD (1.1000), GBPUSD (1.3000), USDJPY (110) are near the critical levels.

Thus, many major market indices came close to a kind of line in the sand. There is no need to worry that some instruments have overcome the round levels, like EURUSD, GBPUSD, while others have not reached them (Dow Jones 2% below 30000). Approaching these levels makes investors look more attentively at the market trend, and stake on either trend development or reversal.

As is often the case with companies’ financial performance, underestimated expectations are usually a good harbinger. Initially, analysts worried about possible weak NFP report. But during the week, the markets adjusted these expectations in response to strong ADP and weekly unemployment claims reports. All of them were significantly above expectations.

The average analyst’s NFP forecast (165k) has been made before the release of the above data, so they are likely to be exceeded. However, the big question is whether they will be strong enough to move the markets up further from the current levels. This may be an essential step not only for the US indices but also for the dollar.

The dollar index is only 1% below last year’s peak levels. Healthy labour data can be a necessary factor to push the dollar to further growth and not to negate the strengthening of stock indices in the short-term.

In this case, the EURUSD pair will open a direct path to the region 1.04-1.06, while GBPUSD risks giving up to a half of the past August growth, down to 1.25 area.

On the other hand, the market reaction to the moderately weak US economic indicators can keep the dollar close to the current levels and return to the markets the speculation around the Fed’s further steps.

The FxPro Analyst Team