Today, there may be a turning point in the market, which everyone has been expecting since the meeting of the Federal Reserve. It is all about the fact that today the monthly US jobs report will be released, and many economists expect that job growth will continue at a rather strong pace in April . All this will lead to a high probability of increased price pressures in the near future, pushing back the Federal Reserve's plans to cut interest rates to a later date. In this light, the US dollar may gain in value.
Figures to be released on Friday by the Bureau of Labor Statistics are likely to show that employers created 240,000 jobs last month. Average hourly earnings are also expected to rise 4% over the past 12 months. However, that would mark the slowest growth in nearly three years, which is kind of a positive sign for the Fed's inflation-fighting efforts.
If the data matches economists' forecasts, it is likely that a solid job rise coupled with slowing wage growth will keep the Federal Reserve's wait-and-see stance on interest rates. Notably, a recent committee meeting left many officials wondering if it would even be appropriate to lower borrowing costs this year.
If we do see wage growth, it will fully support the recent fears of officials, who are already trying to shrug off the possibility of a rate cut anytime soon. It is also worth remembering that Fed policymakers are trying to avoid unnecessary policy aggression. After today's strong report, it will be much harder to do so.
For this reason, if the data exceeds economists' forecasts, the market is unlikely to avoid falling, especially such risky assets as the euro and the British pound.
Many economists cite rising immigration as the main reason why job growth has remained so strong even in the face of high interest rates. Instead, there should have been slower hiring. Higher immigration boosted labor supply by about 80,000 a month last year compared to the established norm. Many analysts expect the average to be higher this year as well.
Economists also foresee average hourly earnings to rise by 0.3% in April, similar to the increase in March. This would bring the annualized rate to 4%. As for unemployment, it is likely to remain at 3.8% in April.
As for the current EUR/USD technical picture, the euro remains in a channel. Now buyers need to think about taking the 1.0750 level. Only this will allow them to test 1.0780. From there, it is possible to climb to 1.0805. However, it will be quite problematic to do it without support from the big players. The furthest target is located at a high of 1.0830. In case of a decline, I expect serious action from big buyers only around 1.0700. If there is no one there, it would be good to wait for an update of the 1.0650 low, or open long positions from 1.0600.
As for the GBP/USD, the pound buyers can't get out of the channel. Bulls need to take the nearest resistance at 1.2565. This will allow them to target 1.2610, above which it will be quite problematic to break through. The furthest target is at 1.2655, after which it will be possible to talk about a sharper rush to 1.2700. If the pair falls, bears will try to take control of 1.2520. If they succeed, a breakdown of the range will deal a serious blow to bulls' positions and push GBP/USD to the 1.2485 low with the prospect of falling to 1.2450.
