iFOREX Daily Analysis – 06/05/2016

 | May 06, 2016 06:12AM ET

The dollar rose against a basket of currencies for a third day on Thursday, as traders closed out profitable bets against the greenback before Friday's U.S. payrolls report, which may confirm the view the Federal Reserve will not raise interest rates soon.
We are seeing some short covering lifting the dollar against most major currencies. You can largely attribute it to tomorrow's nonfarm payrolls report," said yesterday Ron Simpson, director of currency research at Action Economics in Tampa, Florida.
Yesterday trading volume was thin, as Japanese markets were shut for the Golden Week holiday. They will reopen on today.
For today economists polled by Reuters forecast U.S. employers likely added 200,000 workers in April, following a 215,000 increase in March, with the jobless rate holding at 5.0%. In the absence of higher wage growth, together with sluggish global demand, Fed policy-makers will likely refrain from raising policy rates at its June 14-15 policy meeting, which would renew bets the dollar would fall, analysts said.

EUR/USD

The euro fell sharply on Thursday, suffering its worst one-day sell-off in three weeks, as currency traders awaited a key U.S. jobs report for further indications on potential divergence between the European Central Bank and the Federal Reserve.

The currency pair traded between 1.1386 and 1.1494, before settling down 0.72% on the session.

On Thursday morning, the U.S. Department of Labor said initial jobless claims increased by 17,000 to 274,000 last week, slightly above consensus estimates of 262,000. The amount represented the largest one-week spike in 16 months. Still, the 4-week Moving Average increased by only 2,000 to 258,000, remaining below the same measure a month ago. It came one day after the ADP Research Institute said private payrolls rose by 156,000 in April, sharply below consensus estimates of 193,000. Over the first three months of the year, the labor market has added an average of 202,000 private jobs per month.

Today investors’ focus will be on NFP report that will be released by the Bureau of Labor Statistics (BLS), analysts expect an increase of 200,000 in nonfarm payrolls following gains of 215,000 a month earlier. Economists are also anticipating a slight dip in the unemployment rate by 0.1% to 4.9%.