The US dollar stays elevated these days, mainly due to unexpectedly strong economic updates out of the United States. Also, the lingering uncertainty surrounding the China coronavirus and its consequences for the global economy continue to underpin the greenback as a safe-haven currency. By the end of the week, the dollar could add to its recent gains should the key employment report deliver better-than-expected results.
As a reminder, the release earlier this week showed that the ADP employment rose by 291,000 versus +156,000 expected. The unexpectedly robust growth lifted market expectations ahead of the important series of job market data, including wages. The consensus forecast suggests the non-farm employment rose by 160,000 in January. Considering the ADP numbers, the result may exceed expectations, which in turn should give the additional boost to the greenback across the board. Otherwise, a widespread profit taking ahead of the weekend may take place.
As for currency pairs, EURUSD has been losing ground for a fifth day in a row. The common currency got back below the 1.10 handle and registered four-month lows around 1.0960, pressures by strong dollar coupled with dismal economic data out of Germany. Despite oversold signals in the short-term timeframes, the euro could suffer further losses in the near term, as investors express some caution ahead of the weekend, with risk sentiment remaining unstable in the context of the China virus which continues to spread.
USDJPY meanwhile touched the 110.00 handle earlier in the day and was rejected from highs. The pair turned negative in the daily charts but remains elevated, as risk appetite seems to be waning again. Should demand for safe-haven assets pick up during the day, the dollar may settle around 109.80 or lower. Still, weekly gains will remain decent anyway, as the pair was climbing decently since the start of the week. On the downside, a break below the 109.80 intermediate support will open the way towards the 109.50 area. On the bullish side, the dollar needs to make a decisive break above the 110.00 psychological handle in order extend the rally.