Will July’s US jobs report rescue the dollar?

It has been another rough and rocky trading week for the Greenback as heightened political jitters in Washington weighed heavily on the currency.

Friday’s potential market-shaker will be the US jobs report for July, which should offer crucial insights into the health of the US labor market. With the challenging combination of stubbornly low inflation and lackluster economic data weighing heavily on the prospects of higher US interest rates, today’s NFP report may garner extra attention. Markets expect the US economy to have gained 183k jobs in July, with average earnings up by 0.3%, while the unemployment rate is predicted to drop to 4.3%.

While every element of the US jobs report is of great importance, there will be a very strong focus on wage growth as further signs of wages failing to accelerate may fuel concerns over inflation remaining subdued, ultimately feeding the Fed doves. Optimism over the Federal Reserve raising interest rates again this year is waning and a soft US jobs report that fails to plug the holes is likely to expose the Dollar to further losses.

The distressed Dollar is in need of a lifeline and it may take an extreme upside surprise in both headline job numbers and earnings to bring the bulls back into the game.

From a technical standpoint, the Dollar Index is heavily bearish on the daily charts. The breakdown below 93.00 should encourage a further depreciation towards 92.00.

WTI Crude gripped again by oversupply woes

The bearish cocktail of rising US oil production and high OPEC supplies, has exposed WTI Crude to steep losses, with bears dragging the commodity towards $49.00 during early trading on Friday. It is remarkable how production from OPEC hit a 2017 high in July, despite the cartel’s pledge to tackle oversupply woes with other non-OPEC members.

The story of rising production from OPEC and US Shale continues to feel like a battle of attrition, with the victor taking the spoils of war. With oversupply concerns still a dominant theme that fuels the bearish sentiment towards oil, further downside is to be expected. From a technical standpoint, WTI Crude has found strong resistance around the $50 resistance level. A breakdown below $48.50 should encourage a further decline towards $48.00. Bears need to secure a weekly close under $48.00 for WTI Crude to trade back towards $45.50.

Commodity Spotlight – Gold

Gold staged an incredible rebound from the $1257 region during Thursday’s trading session, as political uncertainty in Washington accelerated the flight to safety. A vulnerable US Dollar also complimented the upside, with prices holding steady near a seven-week high at $1269 during early trading on Friday. Investors will be paying very close attention to the NFP report that is released today and is likely to impact rate hike expectations, ultimately affecting Gold’s direction.

A disappointing US jobs report should weaken the Dollar and inspire Gold bulls to challenge $1280, as rate hike expectations diminish further. From a technical standpoint, the yellow metal remains bullish on the daily charts and a breakout above $1270 should encourage a further appreciation towards $1280.