Markets focus on January’s US employment report

Today during the American session (13:30, GMT) we get the US employment report for January. The forecasts are for the unemployment rate to remain unchanged at 3.5%, the average earnings growth rate to accelerate and reach +3.0% yoy, if compared to prior rate of +2.9% yoy and the Non-Farm Payrolls figure to rise and reach +160k if compared to December’s figure of +145k. Should the actual rates and figures meet their respective forecasts we could see the USD strengthening as the unemployment rate remains at rather low levels, average earnings accelerate, implying some further inflationary pressures and the NFP figure remains at rather healthy levels. Such rates and figures could support arguments for a tight US labour market and maintain the current level of confidence of the Fed. Please note that expectations maybe running high after the rise of the ISM readings in the past few days, which indicated a higher level of economic activity for both the manufacturing and non-manufacturing sectors of the US economy. On the flip side, should the prints disappoint the markets, we could see the USD weakening asymmetrically. EUR/USD weakened yesterday breaking the 1.0990 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair as the downward trendline incepted since the 3rd of February still guides the pair’s price action. Please note that the RSI reading in the 4-hour chart remains at the reading of 30 indicating the dominance of the bears, yet at the same time could imply a rather overcrowded short position for the pair. Should the bears remain in charge of the pair’s direction, we could see it breaking the 1.0940 (S1) support line aiming for lower grounds. On the other hand, should the bulls take over, we could see the pair, breaking the 1.0990 (R1) resistance line aiming for the 1.1050 (R2) resistance level.

AUD weakens on coronavirus worries again

The Aussie weakened yesterday against the USD as worries for the coronavirus and its effects on the Australian economy resurfaced. With the disease still spreading and no end in sight, analysts tend to note that that the hit on the Australian economy may be bigger than expected. It should be noted that some have even revised their Q1 GDP forecasts to show a possible contraction of the Australian economy. The weakening of the AUD occurred even though RBA’s Governor Lowe once again underscored the bank’s hesitation to cut rates. Speaking at the Australian Parliament Governor Lowe stated that it would require a material rise in unemployment to tilt the bank’s balance in favor of a cut. We could see the Aussie being more pressured by coronavirus worries in the next few days. Also, we maintain some worries, as China’s trade data for January which were allready due out, have not been released yet and could affect the Aussie’s direction. AUD/USD dropped yesterday as it abandoned the highs of the 0.6755 (R2) resistance level and broke slightly below the 0.6723 (R1) support line, now turned to resistance as well. We maintain a bearish bias for the pair as a new downward trendline seems to start forming yet more data are necessary to confirm it. Should the pair remain under the selling interest of the market, we could see it aiming if not breaking the 0.6685 (S1) support line. On the flip side should the pair’s long positions be favored by the market, we could see it breaking the 0.6723 (R1) resistance line and aim for the 0.6685 (R2) resistance level.

Other economic highlights today and early tomorrow

During the European session today, we get from Germany the industrial output and the trade data both for the December. In the American session we get Canada’s employment data, and the Ivey PMI, both for January, while later on we get from the US the Baker Hughes oil rig count. In Monday’s Asian session Japan’s current account balance and China’s inflationary measures for January are due out.

EUR/USD 4 Hour chart