Participation Rate Finally Ticks Up

  • USDOLLAR
    (${instrument.percentChange}%)

Particpation Rate

Friday's headline NFP disappointed at 210K, missing the consensus of 553K by a large margin. However, of importance, the participation rate ticked up to 61.8%. The series represents the number of the labour force which are either employed or actively seeking employment. This is encouraging as the participation rate has been moving sideways since July 2020 and the upwards movement suggests less discouraged workers and more positivity amongst the total working-age population. In the chart below, we've added momentum (RSI) and trend-following indicators (EMAs). The RSI has moved above 50 (blue rectangle), denoting positive momentum and the trend following indicators have crossed bullishly (red ellipse). If they maintain these positions, then an uptrend is likely underway. The series needs to be monitored because one point does not make a trend, and there is a distinct risk that omicron will disrupt the upwards momentum. However, if there is no disruption, then the trend seems to only be at commencement with potential upside still ahead.


Past Performance: Past Performance is not an indicator of future results.

US Dollar

This tick-up came in a week when the Fed pivoted to a hawkish stance. Last Tuesday, Fed Chair Powell testified in front of the Senate Banking Committee, suggesting a faster tapering to the central bank's asset purchasing program. To this end, yields opened sharply higher today - the US10Y is trading at 1.39, compared to Friday's close of 1.34. This environment is likely to support the dollar. Below is the daily chart of FXCM's dollar basket, USDOLLAR. It is trading in a bullish area, between the upper blue and upper red bands. Given, that the next Fed statement is due on Wednesday 15 December, any deviations are likely to be supported by dollar bulls. The market will also be looking forward to the CPI release at 1:30pm GMT Friday, which is expected to reflect inflationary pressures.


Past Performance: Past Performance is not an indicator of future results.

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Conclusion

On Thursday, San Francisco Fed President Daly maintained that the Fed should "at least...think about raising interest rates." This was reaffirmed on Friday by St Louis Fed President James Bullard who said that " the [FOMC] should remove monetary policy accommodation." Barring any unforseen systemic event, tightening is highly probable in the near term, and this is reflected in the greenback.

Featured Image by Arek Socha from Pixabay

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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