Goldman Sachs on the EUR/USD & USD/JPY - Risk-Reward Into NFP

Goldman Sachs discusses the USD risk-reward going into the NFP & its current forecasts for EUR/USD, and USD/JPY

This is via the people over at eFX

USD Price Action: A Deja Vu.

"The dovish FOMC surprise this March is casting a shadow over the Dollar, similar to a year ago...The last time the FOMC damaged conviction, when a "hawkish" dot plot in March 2014 was followed by "dovish" minutes in April. At the time, the Dollar fully unwound what were the makings of a rally and remained in the doldrums until mid-2014," GS notes.

"In the aftermath of a dovish Fed surprise, are we cruising for a repeat? We think not. After all, the unemployment rate is a lot lower now and there is a reasonable chance it could approach the Fed's NAIRU estimate (5.1%) at some point over the summer. Friday's payrolls report is especially interesting in that regard, because our expectation for solid jobs growth (230k) could come with sizeable back-revisions: on average since 2010, the average 2-month revision in April is 74k, with the smallest being 36k," GS projects.

Risk-Reward Into NFP:

"With lift-off approaching and market pricing at the dovish end of the spectrum, we think this is a good time tactically to re-establish Dollar longs...Ahead of Friday, our favorite expression of Dollar strength is versus the Euro and then the Yen." GS advises.

EUR/USD, USD/JPY Forecasts:

"We continue to have high conviction in EUR/$ downside (our 12-month forecast remains 0.95) and $/JPY upside (a 12-month forecast of 130)," GS projects.