USD: Merrill Lynch recommends a tactical buy ahead of NFP report

In a note published today, Merrill Lynch delivers its recommendations regarding the dollar ahead of the NFP and says it will buy tactically:

NFP Forecast

"The NFP job creation is likely to reach 200k in April, once again mainly thanks to the services sector. The unemployment rate is expected to remain steady at 5%, however, if the participation rate remains stable.

However, there is a risk that it will progress further after having already made good progress since last September, which could push up the unemployment rate, which is not necessarily negative, since this increase would essential stem from the return to the labour market of people who were discouraged.

However, the increase in the labour supply means a lack of upward pressure on wages, and so we expect the rise in average hourly wages to be limited to 0.2%."

USD Forecast

"Given this forecast, we recommend a tactical buy position on the USD. The solid employment report that we are expecting will increase the 6-month average to 224k, which should be enough to not hinder the possibility of a Fed rate hike in June."