The Importance of Friday's Data

CENTRAL BANK FIFO - All of this movement in markets into Thursday and the major event risk for the week is yet to come. For today, the big risk is central bank risk, with the BOE and ECB decisions due. Most of the attention will be on the ECB, with the market ready to fixate on the scope of the ECB's QE package. But the BOE is not to be overlooked and we could get some headline movers on that front as well, with many now expecting the Bank of England to move sooner than later, perhaps right behind the Fed. I suppose it would be fitting in that the crisis of years back first hit the US and then spread to the UK before truly infecting the Eurozone. So now that things have come full circle, we can apply the FIFO rule and look for the Fed to raise rates first, with the UK second.

THE SCENARIO - But unquestionably, whatever happens on Thursday will likely pale in comparison to Friday's US employment report. Everything comes down to this report right now. If the market sees another solid report that shows another improvement in wage growth, this will all but seal the deal for a sooner than later Fed rate hike. The impact of this data will be US Dollar positive and will likely open a fresh wave of Dollar buying. However, if this data disappoints, everything could change very quickly, and as the market pushes back the Fed rate hike timeline on the softer data, the US Dollar will go with it. If the Fed aint raising rates as soon as mid-year, yield differentials will move out of the US Dollar's favour.

Be prepared for the possibility of a softer US NFP print on Friday. Via @joelkruger

CONSIDER THIS - I have to say, given the intensely oversold weekly technical studies in EURUSD at the moment, I wouldn't be surprised in any way to see a corrective rally in the Euro. And with Friday's report coming up, it is possible that the fundamental catalyst for a USD selloff would come from a much weaker print. So for the moment, my best recommendation is to wait and see how things play out on Friday. That being said, if we do see another decline in the Euro to test the 1.1000 barrier ahead of Friday's employment report, it may well be worth taking a shot at a EURUSD long ahead of the NFP print. On the trading side, it's been nice to see the follow through on the SPX500 short, though EURGBP and AUDNZD have yet to make a move. Standing by.

Friday Position Review

Looking at the current exposure as we head into the weekend.


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