If US jobs report were to beat estimates, short AUD/USD?
Jobs report tonight will offer clues whether there will be three or four hikes in 2018. This compromises of all of the three components: non-farm payrolls, unemployment rate and wages growth which are all equally important.
The labor market is in a good shape; earlier indicator shows that ISM employment PMI rose to 58.5 in August from the prior month. The broader uptrend in economic growth which is driven by stronger consumption should support the labor-market in August.
NFP may add 205,000 workers last month after 157,000 in July. A stronger jobs market may help to lower the jobless rate back to 3.8 %. We expected average hourly earnings to rise to 2.7% from a year earlier for the third month straight.
Low unemployment rate and a solid economy may mean that the September interest-rate hike is confirmed. Moderate pay growth last month is one of the reasons why investors aren’t fully convinced that Fed will deliver the fourth hike in December this year. Thus, investors will focus on pay growth tonight to see whether there would be any changes.
The dollar remains to face upside risk after the jobs report tonight. AUD/USD has been ranging at the 0.7150 region for a few days now. It is currently sitting on a major support which is a 2016 low. If the dollar were to strengthen due to a stronger NFP results, that support could break and the price could hit 0.7080 tonight.
