US Dollar May Decline if Payrolls are Anything Less Than Stellar

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" style="text-align:justify"> Talking Points:

US Dollar May Correct Lower if Payrolls Prove Anything Less Than Stellar
Dovish Commentary from FinMin English Sank NZ Dollar in Overnight Trade
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Currency markets are likely to look past a quiet European economic calendar to focus on the much-anticipated release of Augusts’ US Employment data. The report is expected to show that the economy added 230000 jobs topping July’s 209000 increase. US economic news-flow has dramatically outperformed relative to consensus forecasts over recent weeks suggesting analysts are underestimating the vigor of the world’s largest economy and opening the door for an upside surprise.

With that in mind leading survey data is a bit disconcerting suggesting the pace of growth in the service sector – the largest employer in the US – slowed for the third consecutive period last month. Meanwhile the markets have become heavily skewed on the long side of the US Dollar as prices test 12-month highs. That suggests the greenback may be asymmetrically responsive to a downside surprise versus the alternative with even a meager downside surprise threatening to touch off profit-taking and fuel a sharp downward correction.

The New Zealand Dollar underperformed in overnight trade falling as much as 0.3 percent on average against its leading counterparts. The move came against a backdrop of dovish rhetoric from Finance Minister Bill English who said he expects the Kiwi to fall against its US namesake as pressure on interest rates in the island nation moderates while inflationary pressure proves weaker than expected. English added that weak dairy prices represent a “downside risk” for the economy.

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Asia Session

" style="text-align:center"> GMT	" style="text-align:center"> CCY	" style="text-align:center"> EVENT	" style="text-align:center"> ACT	" style="text-align:center"> EXP	" style="text-align:center"> PREV
" style="text-align:center"> 23:30	" style="text-align:center"> AUD	AiG Perf of Construction Index (AUG)	" style="text-align:center"> 55.0	" style="text-align:center"> -	" style="text-align:center"> 52.6
" style="text-align:center"> 23:50	" style="text-align:center"> JPY	Official Reserve Assets ($) (AUG)	" style="text-align:center"> 1278.0B	" style="text-align:center"> -	" style="text-align:center"> 1276.0B
" style="text-align:center"> 5:00	" style="text-align:center"> JPY	Leading Index (JUL P)	" style="text-align:center"> 106.5	" style="text-align:center"> 107.1	" style="text-align:center"> 105.9
" style="text-align:center"> 5:00	" style="text-align:center"> JPY	Coincident Index (JUL P)	" style="text-align:center"> 109.9	" style="text-align:center"> 110.1	" style="text-align:center"> 109.7

European Session

" style="text-align:center"> GMT	" style="text-align:center"> CCY	" style="text-align:center"> EVENT	" style="text-align:center"> EXP/ACT	" style="text-align:center"> PREV	" style="text-align:center"> IMPACT
" style="text-align:center"> 6:00	" style="text-align:center"> EUR	German Industrial Production (MoM) (JUL)	" style="text-align:center"> 1.9% (A)	" style="text-align:center"> 0.4%	" style="text-align:center"> Medium
" style="text-align:center"> 6:00	" style="text-align:center"> EUR	German Industrial Production (YoY) (JUL)	" style="text-align:center"> 2.5% (A)	" style="text-align:center"> -0.4%	" style="text-align:center"> Medium
" style="text-align:center"> 6:30	" style="text-align:center"> AUD	Foreign Reserves (A$) (AUG)	" style="text-align:center"> -	" style="text-align:center"> 62.7B	" style="text-align:center"> Low
" style="text-align:center"> 7:00	" style="text-align:center"> CHF	Foreign Currency Reserves (AUG)	" style="text-align:center"> 455.8B	" style="text-align:center"> 453.4B	" style="text-align:center"> Low
" style="text-align:center"> 7:15	" style="text-align:center"> CHF	Industrial Output (YoY) (2Q)	" style="text-align:center"> 1.5%	" style="text-align:center"> 0.5%	" style="text-align:center"> Low
" style="text-align:center"> 8:30	" style="text-align:center"> GBP	BoE/GfK Inflation Next 12 Mths (AUG)	" style="text-align:center"> -	" style="text-align:center"> 2.6%	" style="text-align:center"> Medium
" style="text-align:center"> 9:00	" style="text-align:center"> EUR	Eurozone GDP s.a. (YoY) (2Q P)	" style="text-align:center"> 0.7%	" style="text-align:center"> 0.7%	" style="text-align:center"> Medium
" style="text-align:center"> 9:00	" style="text-align:center"> EUR	Eurozone GDP s.a. (QoQ) (2Q P)	" style="text-align:center"> 0.0%	" style="text-align:center"> 0.0%	" style="text-align:center"> Medium
" style="text-align:center"> 9:00	" style="text-align:center"> EUR	Eurozone Household Consumption (QoQ) (2Q)	" style="text-align:center"> 0.3%	" style="text-align:center"> 0.2%	" style="text-align:center"> Low
" style="text-align:center"> 9:00	" style="text-align:center"> EUR	Eurozone Gross Fixed Capital (QoQ) (2Q)	" style="text-align:center"> -0.6%	" style="text-align:center"> 0.2%	" style="text-align:center"> Low
" style="text-align:center"> 9:00	" style="text-align:center"> EUR	Eurozone Government Expenditure (QoQ) (2Q)	" style="text-align:center"> 0.2%	" style="text-align:center"> 0.7%	" style="text-align:center"> Low

Critical Levels

" style="text-align:center"> CCY	" style="text-align:center"> Supp 3	" style="text-align:center"> Supp 2	" style="text-align:center"> Supp 1	" style="text-align:center"> Pivot Point	" style="text-align:center"> Res 1	" style="text-align:center"> Res 2	" style="text-align:center"> Res 3
" style="text-align:center"> EURUSD	" style="text-align:center"> 1.2538	" style="text-align:center"> 1.2772	" style="text-align:center"> 1.2858	" style="text-align:center"> 1.3006	" style="text-align:center"> 1.3092	" style="text-align:center"> 1.3240	" style="text-align:center"> 1.3474
" style="text-align:center"> GBPUSD	" style="text-align:center"> 1.6104	" style="text-align:center"> 1.6240	" style="text-align:center"> 1.6285	" style="text-align:center"> 1.6376	" style="text-align:center"> 1.6421	" style="text-align:center"> 1.6512	" style="text-align:center"> 1.6648

" style="text-align:justify"> -- Written by Ilya Spivak Currency Strategist for DailyFX.com

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" style="text-align:justify"> Contact and follow Ilya on Twitter: @IlyaSpivak

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