Dollar struggles to build on post-NFP gains, focus turns to CPI next

The dollar is a little lower at the balance in European morning trade, struggling to build on the gains from after the stronger non-farm payrolls data yesterday. The US jobs report was a solid one, reaffirming another strong January print with beats in both payrolls and the unemployment rate. The latter even coming despite a higher participation rate for the month.The report helped to push the dollar a little higher in the aftermath but so far today, the greenback is not building on gains. So, what gives?The simple argument is that one data point doesn’t make a trend. And until the labour market starts to show further evidence of a recovery, it is fair to assume that some further weakness is still on the horizon.The market thinking arguably reflects that narrative, with the Fed outlook pricing not really all too much changed after the report. Sure, we’re seeing traders pare rate cuts bets slightly and delay the first rate cut priced in from June to July. However, the odds of a possible move in June remain significant and can easily swing back on softer data in the months ahead.Going back to the dollar, we can see that there hasn’t been a big break for the currency against some major pairs:In the case of EUR/USD, the pair was dragged down to test its 200-hour moving average (blue line). However, buyers held at the key near-term level and are now even pushing back to try and reassert a more bullish bias. That as we see price action climb back up above the 100-hour moving average (red line) after a slight drop in Asia trading earlier.Besides that, USD/JPY is also continuing to trip lower as traders remain guarded on intervention risks. The pair has been pushing down since the start of the week, with price now touching 152.90 after briefly keeping around 153.20-50 earlier in the day. The spike on the US jobs report saw the pair touch a high of 154.65 before quickly reversing lower to post three straight days of declines. Another daily drop will take that to a four-day streak, the worst run of form for the pair since September last year.Meanwhile, USD/CHF is also a decent mover on the session so far with the pair down 0.4% to 0.7680. The drop comes as buyers failed to sustain a push to test the 200-hour moving average (blue line) after the stronger data yesterday. And that now sees sellers seize back near-term control as price action falls back under the 100-hour moving average (red line). Essentially, it’s a mirror to what is playing out in EUR/USD above as well.Elsewhere, AUD/USD is also unfazed by whatever the dollar is doing. The aussie quickly recouped losses with the pair having dropped to 0.7070 immediately after the non-farm payrolls and is now keeping around 0.7120 levels on the day. The big picture outlook shows that the pair is contesting key resistance from the August 2022 and January 2023 highs around 0.7135-57 at the moment. So, that is the more important technical point in play for now.As the dollar sees its upside keep rather limited for now, traders will have to be wary that there’s still more data volatility to come. The US CPI report tomorrow is going to be a big one to round off the week. And that could add another plot twist just before the weekend comes along.
This article was written by Justin Low at investinglive.com.

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