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Dollar Recovery Momentum Limited As Fed Tapering Could Be Delayed

ByActionForex
Published 10/22/2013, 03:46 AM
Updated 03/09/2019, 08:30 AM
EUR/USD
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The dollar's recovery is still in progress ahead of the highly anticipated employment data from US but momentum stays very unconvincing. Yesterday, Chicago Fed Evans said that recent government shutdown could delay Fed's tapering schedule. He noted that "a couple of good labor reports" and "evidence of increasing growth" are needed before dialing back the open ended bond purchase. And, "it's probably going to take a few months to sort that one out". Also, Evans said that "it's very difficult to feel confident in December given that we're going to repeat part of what just took place in Washington.". And he emphasized the "number one risk" is "people think we are going to step back and somehow add restrictiveness to the economy at all the wrong times." Indeed, according to a Bloomberg survey, analysts are generally expect Fed to delay tapering to March meeting.

Today's non-farm payroll report is expected to show 180k job growth in September while unemployment rate is expected be unchanged at 7.3%. Based on the above mentioned outlook, the dollar shouldn't get strong enough momentum for a sustainable rebound even in case of an upside surprise in today's NFP. And, any recovery in the greenback is viewed as a selling opportunity. On the other hand, a downside surprise in the data would likely push the EUR/USD through 1.371 medium term resistance. And, that would likely also trigger accelerated selloff in dollar elsewhere. In short, risk is skewed to the downside for the greenback.

Elsewhere, China Conference Board leading indicator rose 0.9% in September. Swiss trade balance and UK public sector net borrowing will be released in European session. Canada will release retail sales in US session.

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