USD Holds on to Gains Ahead of NFP

The market is in lock-down ahead of Tuesday's non-farm payrolls report. The US dollar staged a rebound, especially against the yen, gains were small. With the Asia-Pacific schedule empty, the market might continue to struggle for a theme.

After the dollar damage last week, a bounce on Monday wouldn't have been a surprise but it never materialized. In early US trading, USD/JPY staged a small rally but it fizzled just ahead of the 55-day moving average at 98.27. The euro also fell against the dollar but couldn't break below 1.3650 and rebounded to unchanged.

The market could be sending signals about the weakness of the dollar or traders could be apprehensive ahead of non-farm payrolls. The consensus for the unusual Tuesday report is 180K.

Aside from the regular bounces, the only clear path to a dollar rebound is a turnaround in economic data. It will have to be something that brings forward tapering expectations to January or December. A single NFP reading, even +220K wouldn't be enough along but it would change the conversation. Otherwise, the market is conditioned to sell the dollar.

Another area to watch is oil. WTI crude broke $100 for the first time since July and the recent round of weakness has come despite a falling dollar. If the dollar begins to climb, crude could be susceptible to a quick fall especially if the nearby 200-day moving average breaks.